☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2019
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation (§and post such files). Yes Large accelerated filer) ☒filer ☒ Accelerated filer ☐ ☐ Non-accelerated filer ☐ ☐ ☐ (Do not check if a smaller reporting company)
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock | AME | New York Stock Exchange |
AMETEK, Inc.
Form10-Q
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30 |
Item 1. | Financial Statements |
Net sales Operating expenses: Cost of sales Selling, general and administrative Total operating expenses Operating income Other expenses: Interest expense Other, net Income before income taxes Provision for income taxes Net income Basic earnings per share Diluted earnings per share Weighted average common shares outstanding: Basic shares Diluted shares Dividends declared and paid per share Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 $ 1,084,799 $ 945,030 $ 3,157,085 $ 2,867,134 719,718 630,744 2,084,392 1,894,136 132,250 113,170 387,179 344,323 851,968 743,914 2,471,571 2,238,459 232,831 201,116 685,514 628,675 (24,709 ) (23,609 ) (73,777 ) (70,716 ) (3,695 ) (3,259 ) (12,533 ) (10,108 ) 204,427 174,248 599,204 547,851 50,896 43,561 156,266 144,801 $ 153,531 $ 130,687 $ 442,938 $ 403,050 $ 0.67 $ 0.56 $ 1.93 $ 1.73 $ 0.66 $ 0.56 $ 1.91 $ 1.72 230,439 231,894 230,049 233,387 232,253 232,721 231,615 234,576 $ 0.09 $ 0.09 $ 0.27 $ 0.27 $ $ $ $ ) ) ) ) ) ) ) ) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Total comprehensive income | $ | 185,167 | $ | 124,135 | $ | 522,665 | $ | 378,820 | ||||||||
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Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Total comprehensive income | $ | 219,752 | $ | 154,538 | $ | 435,033 | $ | 350,296 | ||||||||
September 30, 2017 | December 31, 2016 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 736,415 | $ | 717,259 | ||||
Receivables, net | 640,815 | 592,326 | ||||||
Inventories, net | 546,876 | 492,104 | ||||||
Deferred income taxes | — | 50,004 | ||||||
Other current assets | 100,377 | 76,497 | ||||||
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Total current assets | 2,024,483 | 1,928,190 | ||||||
Property, plant and equipment, net | 494,973 | 473,230 | ||||||
Goodwill | 3,138,742 | 2,818,950 | ||||||
Other intangibles, net | 1,965,973 | 1,734,021 | ||||||
Investments and other assets | 159,130 | 146,283 | ||||||
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Total assets | $ | 7,783,301 | $ | 7,100,674 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term borrowings and current portion of long-term debt, net | $ | 509,567 | $ | 278,921 | ||||
Accounts payable | 409,357 | 369,537 | ||||||
Income taxes payable | 47,604 | 29,913 | ||||||
Accrued liabilities | 303,813 | 246,070 | ||||||
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Total current liabilities | 1,270,341 | 924,441 | ||||||
Long-term debt, net | 1,920,879 | 2,062,644 | ||||||
Deferred income taxes | 608,971 | 621,776 | ||||||
Other long-term liabilities | 216,955 | 235,300 | ||||||
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Total liabilities | 4,017,146 | 3,844,161 | ||||||
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Stockholders’ equity: | ||||||||
Common stock | 2,630 | 2,615 | ||||||
Capital in excess of par value | 649,807 | 604,143 | ||||||
Retained earnings | 4,784,618 | 4,403,683 | ||||||
Accumulated other comprehensive loss | (462,662 | ) | (542,389 | ) | ||||
Treasury stock | (1,208,238 | ) | (1,211,539 | ) | ||||
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Total stockholders’ equity | 3,766,155 | 3,256,513 | ||||||
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Total liabilities and stockholders’ equity | $ | 7,783,301 | $ | 7,100,674 | ||||
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June 30, | December 31, | |||||||
2019 | 2018 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 567,912 | $ | 353,975 | ||||
Receivables, net | 757,522 | 732,839 | ||||||
Inventories, net | 634,138 | 624,744 | ||||||
Other current assets | 167,581 | 124,586 | ||||||
Total current assets | 2,127,153 | 1,836,144 | ||||||
Property, plant and equipment, net | 538,256 | 554,130 | ||||||
Right of use assets, net | 182,902 | — | ||||||
Goodwill | 3,613,182 | 3,612,033 | ||||||
Other intangibles, net | 2,338,511 | 2,403,771 | ||||||
Investments and other assets | 269,598 | 256,210 | ||||||
Total assets | $ | 9,069,602 | $ | 8,662,288 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term borrowings and current portion of long-term debt, net | $ | 98,356 | $ | 358,876 | ||||
Accounts payable | 390,443 | 399,571 | ||||||
Customer advanced payments | 140,635 | 137,229 | ||||||
Income taxes payable | 33,029 | 48,597 | ||||||
Accrued liabilities and other | 316,095 | 314,431 | ||||||
Total current liabilities | 978,558 | 1,258,704 | ||||||
Long-term debt, net | 2,368,690 | 2,273,837 | ||||||
Deferred income taxes | 544,218 | 528,336 | ||||||
Other long-term liabilities | 511,355 | 359,489 | ||||||
Total liabilities | 4,402,821 | 4,420,366 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 2,654 | 2,640 | ||||||
Capital in excess of par value | 759,775 | 706,743 | ||||||
Retained earnings | 6,009,968 | 5,653,811 | ||||||
Accumulated other comprehensive loss | (535,826 | ) | (551,088 | ) | ||||
Treasury stock | (1,569,790 | ) | (1,570,184 | ) | ||||
Total stockholders’ equity | 4,666,781 | 4,241,922 | ||||||
Total liabilities and stockholders’ equity | $ | 9,069,602 | $ | 8,662,288 | ||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Capital stock | ||||||||||||||||
Preferred stock, $0.01 par value | $ | — | $ | — | $ | — | $ | — | ||||||||
Common stock, $0.01 par value | ||||||||||||||||
Balance at the beginning of the period | 2,647 | 2,634 | 2,640 | 2,631 | ||||||||||||
Shares issued | 7 | 3 | 14 | 6 | ||||||||||||
Balance at the end of the period | 2,654 | 2,637 | 2,654 | 2,637 | ||||||||||||
Capital in excess of par value | ||||||||||||||||
Balance at the beginning of the period | 738,173 | 673,516 | 706,743 | 660,894 | ||||||||||||
Issuance of common stock under employee stock plans | 13,277 | (37 | ) | 37,586 | 7,014 | |||||||||||
Share-based compensation costs | 8,325 | 7,384 | 15,446 | 12,955 | ||||||||||||
Balance at the end of the period | 759,775 | 680.863 | 759,775 | 680,863 | ||||||||||||
Retained earnings | ||||||||||||||||
Balance at the beginning of the period | 5,826,313 | 5,153,722 | 5,653,811 | 5,002,419 | ||||||||||||
Net income | 215,503 | 193,860 | 419,771 | 375,200 | ||||||||||||
Cash dividends paid | (31,849 | ) | (32,351 | ) | (63,615 | ) | (64,653 | ) | ||||||||
Other | 1 | 1 | 1 | 2,266 | ||||||||||||
Balance at the end of the period | 6,009,968 | 5,315,232 | 6,009,968 | 5,315,232 | ||||||||||||
Accumulated other comprehensive (loss) income | ||||||||||||||||
Foreign currency translation: | ||||||||||||||||
Balance at the beginning of the period | (294,082 | ) | (239,620 | ) | (302,138 | ) | (251,909 | ) | ||||||||
Translation adjustments | (2,789 | ) | (70,213 | ) | 6,175 | (40,532 | ) | |||||||||
Change in long-term intercompany notes | 3,396 | (14,706 | ) | (1,020 | ) | (9,302 | ) | |||||||||
Net investment hedge instruments gain (loss), net of tax of ($220) and ($13,967) for the quarter ended June 30, 2019 and 2018 and ($1,350) and ($6,625) for the six months ended June 30, 2019 and 2018, respectively | 685 | 43,364 | 4,193 | 20,568 | ||||||||||||
Balance at the end of the period | (292,790 | ) | (281,175 | ) | (292,790 | ) | (281,175 | ) | ||||||||
Defined benefit pension plans: | ||||||||||||||||
Balance at the beginning of the period | (245,993 | ) | (175,138 | ) | (248,950 | ) | (177,371 | ) | ||||||||
Amortization of net actuarial loss (gain) and other, net of tax of ($873) and ($719) for the quarter ended June 30, 2019 and 2018, and ($1,746) and ($1,438) for the six months ended June 30, 2019 and 2018, respectively | 2,957 | 2,233 | 5,914 | 4,466 | ||||||||||||
Balance at the end of the period | (243,036 | ) | (172,905 | ) | (243,036 | ) | (172,905 | ) | ||||||||
Unrealized holding gain (loss) on available-for-sale securities: | ||||||||||||||||
Balance at the beginning of the period | — | — | — | 104 | ||||||||||||
Increase (decrease) during the year, net of tax | — | — | — | (104 | ) | |||||||||||
Balance at the end of the period | — | — | — | — | ||||||||||||
Accumulated other comprehensive loss at the end of the period | (535,826 | ) | (454,080 | ) | (535,826 | ) | (454,080 | ) | ||||||||
Treasury stock | ||||||||||||||||
Balance at the beginning of the period | (1,570,437 | ) | (1,210,717 | ) | (1,570,184 | ) | (1,209,135 | ) | ||||||||
Issuance of common stock under employee stock plans | 6,832 | 8,050 | 6,716 | 6,586 | ||||||||||||
Purchase of treasury stock | (6,185 | ) | (3,889 | ) | (6,322 | ) | (4,007 | ) | ||||||||
Balance at the end of the period | (1,569,790 | ) | (1,206,556 | ) | (1,569,790 | ) | (1,206,556 | ) | ||||||||
Total stockholders’ equity | $ | 4,666,781 | $ | 4,338,096 | $ | 4,666,781 | $ | 4,338,096 | ||||||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2017 | 2016 | |||||||
Cash provided by (used for): | ||||||||
Operating activities: | ||||||||
Net income | $ | 442,938 | $ | 403,050 | ||||
Adjustments to reconcile net income to total operating activities: | ||||||||
Depreciation and amortization | 131,005 | 122,968 | ||||||
Deferred income taxes | 20,492 | (2,638 | ) | |||||
Share-based compensation expense | 19,689 | 16,393 | ||||||
Gain on sale of facility | (1,133 | ) | — | |||||
Net change in assets and liabilities, net of acquisitions | 19,221 | (27,428 | ) | |||||
Pension contribution | (52,493 | ) | (3,003 | ) | ||||
Other, net | 675 | 175 | ||||||
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Total operating activities | 580,394 | 509,517 | ||||||
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Investing activities: | ||||||||
Additions to property, plant and equipment | (45,630 | ) | (40,497 | ) | ||||
Purchases of businesses, net of cash acquired | (518,634 | ) | (359,976 | ) | ||||
Proceeds from sale of facility | 2,239 | — | ||||||
Other, net | (400 | ) | 500 | |||||
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Total investing activities | (562,425 | ) | (399,973 | ) | ||||
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Financing activities: | ||||||||
Net change in short-term borrowings | (9,601 | ) | 237,100 | |||||
Repurchases of common stock | (6,730 | ) | (236,078 | ) | ||||
Cash dividends paid | (62,003 | ) | (62,705 | ) | ||||
Excess tax benefits from share-based payments | — | 5,061 | ||||||
Proceeds from employee stock plans and other, net | 35,345 | 15,234 | ||||||
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Total financing activities | (42,989 | ) | (41,388 | ) | ||||
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Effect of exchange rate changes on cash and cash equivalents | 44,176 | (3,692 | ) | |||||
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Increase in cash and cash equivalents | 19,156 | 64,464 | ||||||
Cash and cash equivalents: | ||||||||
Beginning of period | 717,259 | 381,005 | ||||||
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End of period | $ | 736,415 | $ | 445,469 | ||||
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Six Months Ended | ||||||||
June 30, | ||||||||
2019 | 2018 | |||||||
Cash provided by (used for): | ||||||||
Operating activities: | ||||||||
Net income | $ | 419,771 | $ | 375,200 | ||||
Adjustments to reconcile net income to total operating activities: | ||||||||
Depreciation and amortization | 114,673 | 97,777 | ||||||
Deferred income taxes | 7,347 | (5,734 | ) | |||||
Share-based compensation expense | 15,446 | 12,955 | ||||||
Gain on sale of facilities | (735 | ) | — | |||||
Net change in assets and liabilities, net of acquisitions | (110,690 | ) | (99,526 | ) | ||||
Pension contributions | (1,534 | ) | (1,404 | ) | ||||
Other, net | (1,700 | ) | 1,274 | |||||
Total operating activities | 442,578 | 380,542 | ||||||
Investing activities: | ||||||||
Additions to property, plant and equipment | (43,278 | ) | (28,565 | ) | ||||
Purchases of businesses, net of cash acquired | — | (374,644 | ) | |||||
Other, net | 3,667 | 1,481 | ||||||
Total investing activities | (39,611 | ) | (401,728 | ) | ||||
Financing activities: | ||||||||
Net change in short-term borrowings | (260,802 | ) | (44 | ) | ||||
Proceeds from long-term borrowings | 100,000 | — | ||||||
Repurchases of common stock | (6,322 | ) | (4,007 | ) | ||||
Cash dividends paid | (63,615 | ) | (64,653 | ) | ||||
Proceeds from stock option exercises | 45,830 | 18,264 | ||||||
Other, net | (6,613 | ) | (5,108 | ) | ||||
Total financing activities | (191,522 | ) | (55,548 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 2,492 | (11,873 | ) | |||||
Increase (decrease) in cash and cash equivalents | 213,937 | (88,607 | ) | |||||
Cash and cash equivalents: | ||||||||
Beginning of period | 353,975 | 646,300 | ||||||
End of period | $ | 567,912 | $ | 557,693 | ||||
September
2019
1. | Basis of Presentation |
2. | Recent Accounting Pronouncements |
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2014-09,Revenue from Contracts with Customers(“ASU 2014-09”) and modified the standard thereafter. The objective ofASU 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance. The core principle ofASU 2014-09 is that an entity recognizes revenue at the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification.
ASU 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2017 and may be early adopted for interim and annual reporting periods beginning after December 15, 2016. The Company will adoptASU 2014-09 as of January 1, 2018. The guidance permits adoption by retrospectively applying the guidance to each prior reporting period presented (full retrospective method) or prospectively applying the guidance and providing additional disclosures comparing results to previous guidance, with the cumulative effect of initially applying the guidance recognized in beginning retained earnings at the date of initial application (modified retrospective method). The Company expects to use the modified retrospective method of adoption.
ASU 2014-09 is primarily expected to impact the Company’s revenue recognition procedures by requiring recognition of certain revenues to move from upon shipment or delivery to over-time. The recording of certain revenues over-time is not expected to have a material impact on the Company’s consolidated results of operations or financial position. Also, the Company is developing the additional expanded disclosures required. The Company is in the process of implementing the appropriate changes to business processes and controls to support recognition and disclosure underASU 2014-09. The Company does not currently expect the adoption ofASU 2014-09 to have a material impact on its consolidated results of operations, financial position and cash flows.
In July 2015, the FASB issuedASU No. 2015-11,Simplifying the Measurement of Inventory(“ASU 2015-11”), which applies to inventory that is measured usingfirst-in,first-out (“FIFO”) or average cost. As prescribed in this update, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured usinglast-in,first-out (“LIFO”). The Company prospectively adoptedASU 2015-11 effective January 1, 2017 and the adoption did not have a significant impact on the Company’s consolidated results of operations, financial position or cash flows.
AMETEK, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
(Unaudited)
In November 2015, the FASB issuedASU No. 2015-17,Balance Sheet Classification of Deferred Taxes(“ASU 2015-17”).ASU 2015-17 simplifies the presentation of deferred taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the consolidated balance sheet. The Company prospectively adoptedASU 2015-17 effective January 1, 2017 and the adoption did not have a significant impact on the Company’s consolidated results of operations, financial position or cash flows. The December 31, 2016 consolidated balance sheet was not adjusted for the adoption ofASU 2015-17.
In March 2016,
3. | Revenues |
2019 | 2018 | |||||||
(In thousands) | ||||||||
Contract assets - January 1 | $ | 58,266 | $ | 32,658 | ||||
Contract assets – June 30 | 82,063 | 41,722 | ||||||
Change in contract assets – increase | 23,797 | 9,064 | ||||||
Contract liabilities – January 1 | 146,162 | 117,058 | ||||||
Contract liabilities – June 30 | 151,447 | 142,016 | ||||||
Change in contract liabilities – increase | (5,285 | ) | (24,958 | ) | ||||
Net change | $ | 18,512 | $ | (15,894 | ) | |||
September
2019
In March 2017,
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
United States | $ | 425,543 | $ | 250,904 | $ | 676,447 | $ | 828,935 | $ | 511,658 | $ | 1,340,593 | ||||||||||||
International (1): | ||||||||||||||||||||||||
United Kingdom | 12,920 | 32,450 | 45,370 | 28,347 | 66,338 | 94,685 | ||||||||||||||||||
European Union countries | 100,835 | 103,362 | 204,198 | 203,620 | 209,781 | 413,401 | ||||||||||||||||||
Asia | 185,287 | 48,577 | 233,863 | 379,134 | 95,688 | 474,821 | ||||||||||||||||||
Other foreign countries | 95,662 | 33,872 | 129,534 | 187,122 | 66,480 | 253,603 | ||||||||||||||||||
Total international | 394,704 | 218,261 | 612,965 | 798,223 | 438,287 | 1,236,510 | ||||||||||||||||||
Consolidated net sales | $ | 820,247 | $ | 469,165 | $ | 1,289,412 | $ | 1,627,158 | $ | 949,945 | $ | 2,577,103 | ||||||||||||
(1) | Includes U.S. export sales of $ 322.1 million and $647.5 million for the three months ended and the six months ended, respectively. |
Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
United States | $ | 357,560 | $ | 241,935 | $ | 599,495 | $ | 686,636 | $ | 472,799 | $ | 1,159,435 | ||||||||||||
International(1): | ||||||||||||||||||||||||
United Kingdom | 15,588 | 33,166 | 48,754 | 29,328 | 68,549 | 97,877 | ||||||||||||||||||
European Union countries | 95,778 | 98,585 | 194,363 | 188,080 | 206,399 | 394,479 | ||||||||||||||||||
Asia | 191,169 | 55,435 | 246,604 | 382,654 | 106,498 | 489,152 | ||||||||||||||||||
Other foreign countries | 84,363 | 35,356 | 119,719 | 174,186 | 66,453 | 240,639 | ||||||||||||||||||
Total international | 386,898 | 222,542 | 609,440 | 774,248 | 447,899 | 1,222,147 | ||||||||||||||||||
Consolidated net sales | $ | 744,458 | $ | 464,477 | $ | 1,208,935 | $ | 1,460,884 | $ | 920,698 | $ | 2,381,582 | ||||||||||||
(1) | Includes U.S. export sales of $ 320.5 million and $635.6 million for the three months ended and the six months ended, respectively. |
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Process and analytical instrumentation | $ | 583,938 | $ | — | $ | 583,938 | $ | 1,161,278 | $ | — | $ | 1,161,278 | ||||||||||||
Aerospace and Power | 236,309 | 120,392 | 356,701 | 465,880 | 239,270 | 705,150 | ||||||||||||||||||
Automation and engineered solutions | — | 348,773 | 348,773 | — | 710,675 | 710,675 | ||||||||||||||||||
Consolidated net sales | $ | 820,247 | $ | 469,165 | $ | 1,289,412 | $ | 1,627,158 | $ | 949,945 | $ | 2,577,103 | ||||||||||||
Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Process and analytical instrumentation | $ | 515,854 | $ | — | $ | 515,854 | $ | 1,015,491 | $ | — | $ | 1,015,491 | ||||||||||||
Aerospace and Power | 228,604 | 113,403 | 342,007 | 445,393 | 222,060 | 667,453 | ||||||||||||||||||
Automation and engineered solutions | — | 351,074 | 351,074 | — | 698,638 | 698,638 | ||||||||||||||||||
Consolidated net sales | $ | 744,458 | $ | 464,477 | $ | 1,208,935 | $ | 1,460,884 | $ | 920,698 | $ | 2,381,582 | ||||||||||||
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Products transferred at a point in time | $ | 654,155 | $ | 434,175 | $ | 1,088,330 | $ | 1,331,988 | $ | 869,780 | $ | 2,201,768 | ||||||||||||
Products and services transferred over time | 166,092 | 34,990 | 201,082 | 295,170 | 80,165 | 375,335 | ||||||||||||||||||
Consolidated net sales | $ | 820,247 | $ | 469,165 | $ | 1,289,412 | $ | 1,627,158 | $ | 949,945 | $ | 2,577,103 | ||||||||||||
Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Products transferred at a point in time | $ | 603,185 | $ | 437,630 | $ | 1,040,815 | $ | 1,228,607 | $ | 866,712 | $ | 2,095,319 | ||||||||||||
Products and services transferred over time | 141,273 | 26,847 | 168,120 | 232,277 | 53,986 | 286,263 | ||||||||||||||||||
Consolidated net sales | $ | 744,458 | $ | 464,477 | $ | 1,208,935 | $ | 1,460,884 | $ | 920,698 | $ | 2,381,582 | ||||||||||||
In May 2017, the FASB issuedASU No. 2017-09,Scope of Modification Accounting(“ASU 2017-09”).ASU 2017-09 clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting.ASU 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017 and early adoption is permitted. The Company does not expect the adoption ofASU 2017-09 to have a significant impact on the Company’s consolidated results of operations, financial position or cash flows.
Six Months Ended June 30, | ||||||||
2019 | 2018 | |||||||
(In thousands) | ||||||||
Balance at the beginning of the period | $ | 23,482 | $ | 22,872 | ||||
Accruals for warranties issued during the period | 8,196 | 5,904 | ||||||
Settlements made during the period | (9,275 | ) | (7,068 | ) | ||||
Warranty accruals related to acquired businesses and other during the period | (89 | ) | 796 | |||||
Balance at the end of the period | $ | 22,314 | $ | 22,504 | ||||
Earnings Per Share |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Weighted average shares: | ||||||||||||||||
Basic shares | 230,439 | 231,894 | 230,049 | 233,387 | ||||||||||||
Equity-based compensation plans | 1,814 | 827 | 1,566 | 1,189 | ||||||||||||
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| |||||||||
Diluted shares | 232,253 | 232,721 | 231,615 | 234,576 | ||||||||||||
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|
AMETEK, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
(Unaudited)
The components of accumulated other comprehensive income (loss) consisted of the following:
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
September 30, 2017 | September 30, 2016 | |||||||||||||||||||||||
Foreign Currency Items and Other | Defined Benefit Pension Plans | Total | Foreign Currency Items and Other | Defined Benefit Pension Plans | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Balance at the beginning of the period | $ | (294,922 | ) | $ | (199,376 | ) | $ | (494,298 | ) | $ | (271,501 | ) | $ | (151,808 | ) | $ | (423,309 | ) | ||||||
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| |||||||||||||
Other comprehensive income (loss) before reclassifications: | ||||||||||||||||||||||||
Translation adjustments | 37,642 | — | 37,642 | (10,441 | ) | — | (10,441 | ) | ||||||||||||||||
Change in long-term intercompany notes | 12,035 | — | 12,035 | 3,063 | — | 3,063 | ||||||||||||||||||
Net investment hedge instruments | (32,422 | ) | — | (32,422 | ) | (1,212 | ) | — | (1,212 | ) | ||||||||||||||
Gross amounts reclassified from accumulated other comprehensive income (loss) | — | 3,512 | 3,512 | — | 2,484 | 2,484 | ||||||||||||||||||
Income tax benefit (expense) | 12,190 | (1,321 | ) | 10,869 | 423 | (869 | ) | (446 | ) | |||||||||||||||
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| |||||||||||||
Other comprehensive income (loss), net of tax | 29,445 | 2,191 | 31,636 | (8,167 | ) | 1,615 | (6,552 | ) | ||||||||||||||||
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| |||||||||||||
Balance at the end of the period | $ | (265,477 | ) | $ | (197,185 | ) | $ | (462,662 | ) | $ | (279,668 | ) | $ | (150,193 | ) | $ | (429,861 | ) | ||||||
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| |||||||||||||
Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, 2017 | September 30, 2016 | |||||||||||||||||||||||
Foreign Currency Items and Other | Defined Benefit Pension Plans | Total | Foreign Currency Items and Other | Defined Benefit Pension Plans | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Balance at the beginning of the period | $ | (338,631 | ) | $ | (203,758 | ) | $ | (542,389 | ) | $ | (250,593 | ) | $ | (155,038 | ) | $ | (405,631 | ) | ||||||
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| |||||||||||||
Other comprehensive income (loss) before reclassifications: | ||||||||||||||||||||||||
Translation adjustments | 101,846 | — | 101,846 | (26,581 | ) | — | (26,581 | ) | ||||||||||||||||
Change in long-term intercompany notes | 30,727 | — | 30,727 | 6,862 | — | 6,862 | ||||||||||||||||||
Net investment hedge instruments | (95,311 | ) | — | (95,311 | ) | (14,393 | ) | — | (14,393 | ) | ||||||||||||||
Gross amounts reclassified from accumulated other comprehensive income (loss) | — | 10,536 | 10,536 | — | 7,452 | 7,452 | ||||||||||||||||||
Income tax benefit (expense) | 35,892 | (3,963 | ) | 31,929 | 5,037 | (2,607 | ) | 2,430 | ||||||||||||||||
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| |||||||||||||
Other comprehensive income (loss), net of tax | 73,154 | 6,573 | 79,727 | (29,075 | ) | 4,845 | (24,230 | ) | ||||||||||||||||
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| |||||||||||||
Balance at the end of the period | $ | (265,477 | ) | $ | (197,185 | ) | $ | (462,662 | ) | $ | (279,668 | ) | $ | (150,193 | ) | $ | (429,861 | ) | ||||||
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Reclassifications for the amortization of defined benefit pension plans are included in Cost of sales in the consolidated statement of income. See Note 12 for further details.
AMETEK, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands) | ||||||||||||||||
Weighted average shares: | ||||||||||||||||
Basic shares | 227,577 | 231,252 | 227,219 | 231,090 | ||||||||||||
Equity-based compensation plans | 1,751 | 2,045 | 1,788 | 2,041 | ||||||||||||
Diluted shares | 229,328 | 233,297 | 229,007 | 233,131 | ||||||||||||
5. | Fair Value Measurements |
September 30, 2017 | December 31, 2016 | |||||||
Fair Value | Fair Value | |||||||
(In thousands) | ||||||||
Fixed-income investments | $ | 7,896 | $ | 7,317 |
hierarchy, at June 30, 2019 and December 31, 2018:
June 30, 2019 | December 31, 2018 | |||||||
Fair Value | Fair Value | |||||||
(In thousands) | ||||||||
Fixed-income investments | $ | 8,137 | $ | 7,655 |
2018.
September 30, 2017 | December 31, 2016 | |||||||||||||||
Recorded Amount | Fair Value | Recorded Amount | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Short-term borrowings, net | $ | — | $ | — | $ | — | $ | — | ||||||||
Long-term debt, net (including current portion) | (2,430,446 | ) | (2,456,920 | ) | (2,341,565 | ) | (2,386,901 | ) |
2018:
June 30, 2019 | December 31, 2018 | |||||||||||||||
Recorded Amount | Fair Value | Recorded Amount | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Long-term debt, net (including current portion) | $ | (2,473,695 | ) | $ | (2,611,123 | ) | $ | (2,378,809 | ) | $ | (2,368,676 | ) |
AMETEK, Inc.
Notes to Consolidated Financial Statements
September
(Unaudited)
6. | Hedging Activities |
7. | Inventories, net |
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
(In thousands) | ||||||||
Finished goods and parts | $ | 79,897 | $ | 75,827 | ||||
Work in process | 118,979 | 101,484 | ||||||
Raw materials and purchased parts | 348,000 | 314,793 | ||||||
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|
|
| |||||
Total inventories, net | $ | 546,876 | $ | 492,104 | ||||
|
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|
|
$ $ $ $
8. | Leases |
September
2019
The following table represents the preliminary allocation of the aggregate purchase price for the net assets of the 2017 acquisitions based on their estimated fair values at acquisition (in millions):
Property, plant and equipment | $ | 21.5 | ||
Goodwill | 256.4 | |||
Other intangible assets | 269.5 | |||
Long-term liabilities | (10.6 | ) | ||
Deferred income taxes | (27.2 | ) | ||
Net working capital and other(1) | 34.5 | |||
|
| |||
Total purchase price | 544.1 | |||
Less: Contingent payment liability | (25.5 | ) | ||
|
| |||
Total cash paid | $ | 518.6 | ||
|
|
The amount allocated to goodwill is reflective of the benefits the Company expects to realize from the 2017 acquisitions as follows: Rauland provides the Company with attractive new growth opportunities within the medical technology market, strong growth opportunitiesequipment used in its core marketsoperations. Our leases have initial lease terms ranging from one month to 14 years. Certain lease agreements contain provisions for future rent increases.
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||||
(In thousands) | (In thousands) | |||||||
Operating lease cost | $ | 10,038 | $ | 18,709 | ||||
Variable lease cost | 899 | 2,530 | ||||||
Total lease cost | $ | 10,937 | $ | 21,239 | ||||
June 30, 2019 | ||||
(In thousands) | ||||
Right of use assets, net | $ | 182,902 | ||
Lease liabilities included in Accrued liabilities and other | 41,751 | |||
Lease liabilities included in Other long-term liabilities | 147,344 | |||
Total lease liabilities | $ | 189,095 | ||
Six Months Ended June 30, 2019 | ||||
(In thousands) | ||||
Cash used in operations for operating leases | $ | 10,937 | ||
Right-of-use assets obtained in exchange for new operating liabilities | $ | 8,634 | ||
Weighted-average remaining lease terms - operating leases (years) | 6.06 | |||
Weighted-average discount rate - operating leases | 3.80 | % |
Lease Liability Maturity Analysis | Operating Leases | |||
(In thousands) | ||||
Remaining 2019 | $ | 24,825 | ||
2020 | 44,598 | |||
2021 | 37,063 | |||
2022 | 29,621 | |||
2023 | 23,893 | |||
Thereafter | 52,579 | |||
Total lease payments | 212,579 | |||
Less: imputed interest | 23,484 | |||
$ | 189,095 | |||
At September 30, 2017, purchase price allocated to other intangible assets of $269.5 million consists of $53.6 million of indefinite-lived intangible trade names,does not have any leases that have not yet commenced which are not subjectsignificant.
9. | Goodwill |
goodwill by segment were as follows:
EIG | EMG | Total | ||||||||||
(In millions) | ||||||||||||
Balance at December 31, 2018 | $ | 2,452.0 | $ | 1,160.0 | $ | 3,612.0 | ||||||
Goodwill acquired | — | — | — | |||||||||
Purchase price allocation adjustments and other | 1.8 | (0.3 | ) | 1.5 | ||||||||
Foreign currency translation adjustments | 1.3 | (1.6 | ) | (0.3 | ) | |||||||
Balance at June 30, 2019 | $ | 2,455.1 | $ | 1,158.1 | $ | 3,613.2 | ||||||
The above mentioned contingent payment is based on Rauland achieving a certain cumulative revenue target over the period October 1, 2016 to September 30, 2018. If Rauland achieves the target, the $30 million contingent payment will be made; however, if the target is not achieved, no payment will be made. At the acquisition date, the estimated fair value of the contingent payment liability was $25.5 million, which was based on a probabilistic approach using level 3 inputs. At September 30, 2017, there was no change to the estimated fair value of the contingent payment liability.
The 2017 acquisitions had an immaterial impact on reported net sales, net income and diluted earnings per share for the three and nine months ended September 30, 2017. Had the 2017 acquisitions been made at the beginning of 2017 or 2016, unaudited pro forma net sales, net income and diluted earnings per share for the three and nine months ended September 30, 2017 and 2016, respectively, would not have been materially different than the amounts reported.
AMETEK, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
(Unaudited)
The changes in the carrying amounts of goodwill by segment were as follows:
Electronic Instruments Group | Electro- mechanical Group | Total | ||||||||||
(In millions) | ||||||||||||
Balance at December 31, 2016 | $ | 1,817.0 | $ | 1,002.0 | $ | 2,819.0 | ||||||
Goodwill acquired | 256.4 | — | 256.4 | |||||||||
Purchase price allocation adjustments and other | 0.1 | 0.6 | 0.7 | |||||||||
Foreign currency translation adjustments | 31.2 | 31.4 | 62.6 | |||||||||
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|
|
| |||||||
Balance at September 30, 2017 | $ | 2,104.7 | $ | 1,034.0 | $ | 3,138.7 | ||||||
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|
|
10. | Income Taxes |
Balance at December 31, 2016 | $ | 57.9 | ||
Additions for tax positions | 8.7 | |||
Reductions for tax positions | (8.1 | ) | ||
|
| |||
Balance at September 30, 2017 | $ | 58.5 | ||
|
|
Balance at December 31, 2018 | $ | 119.3 | ||
Additions for tax positions | 9.3 | |||
Reductions for tax positions | — | |||
Balance at June 30, 2019 | $ | 128.6 | ||
11. | Debt |
12. | Share-Based Compensation |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Stock option expense | $ | 2,482 | $ | 2,311 | $ | 7,449 | $ | 7,634 | ||||||||
Restricted stock expense | 3,094 | 3,047 | 12,240 | 8,759 | ||||||||||||
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|
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| |||||||||
Totalpre-tax expense | $ | 5,576 | $ | 5,358 | $ | 19,689 | $ | 16,393 | ||||||||
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|
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands) | ||||||||||||||||
Stock option expense | $ | 3,608 | $ | 3,115 | $ | 6,380 | $ | 5,543 | ||||||||
Restricted stock expense | 3,399 | 3,772 | 7,117 | 6,848 | ||||||||||||
PRSU expense | 1,318 | 497 | 1,949 | 564 | ||||||||||||
Total pre-tax expense | $ | 8,325 | $ | 7,384 | $ | 15,446 | $ | 12,955 | ||||||||
September
2019
Nine Months Ended | Year Ended | |||||||
September 30, 2017 | December 31, 2016 | |||||||
Expected volatility | 18.0 | % | 21.8 | % | ||||
Expected term (years) | 5.0 | 5.0 | ||||||
Risk-free interest rate | 1.94 | % | 1.23 | % | ||||
Expected dividend yield | 0.60 | % | 0.77 | % | ||||
Black-Scholes-Merton fair value per stock option granted | $ | 11.05 | $ | 9.14 |
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | |||||||
Expected volatility | 19.1 | % | 17.3 | % | ||||
Expected term (years) | 5.0 | 5.0 | ||||||
Risk-free interest rate | 2.25 | % | 2.81 | % | ||||
Expected dividend yield | 0.66 | % | 0.76 | % | ||||
Black-Scholes-Merton fair value per stock option granted | $ | 16.85 | $ | 14.12 |
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
(In thousands) | (Years) | (In millions) | ||||||||||||||
Outstanding at December 31, 2016 | 6,011 | $ | 42.25 | |||||||||||||
Granted | 1,331 | 60.32 | ||||||||||||||
Exercised | (1,388 | ) | 30.96 | |||||||||||||
Forfeited | (180 | ) | 52.17 | |||||||||||||
Expired | (8 | ) | 52.10 | |||||||||||||
|
| |||||||||||||||
Outstanding at September 30, 2017 | 5,766 | $ | 48.81 | 4.4 | $ | 99.3 | ||||||||||
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|
| |||||||||
Exercisable at September 30, 2017 | 3,010 | $ | 43.74 | 3.1 | $ | 67.1 | ||||||||||
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|
|
|
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
(In thousands) | (Years) | (In millions) | ||||||||||||||
Outstanding at December 31, 2018 | 5,629 | $ | 53.46 | |||||||||||||
Granted | 826 | 85.43 | ||||||||||||||
Exercised | (1,100 | ) | 41.90 | |||||||||||||
Forfeited | (143 | ) | 64.77 | |||||||||||||
Outstanding at June 30, 2019 | 5,212 | $ | 60.65 | 5.2 | $ | 157.3 | ||||||||||
Exercisable at June 30, 2019 | 3,064 | $ | 53.08 | 3.5 | $ | 115.7 | ||||||||||
years
Shares | Weighted Average Grant Date Fair Value | |||||||
(In thousands) | ||||||||
Nonvested restricted stock outstanding at December 31, 2016 | 1,019 | $ | 48.59 | |||||
Granted | 335 | 60.24 | ||||||
Vested | (317 | ) | 47.41 | |||||
Forfeited | (66 | ) | 51.33 | |||||
|
| |||||||
Nonvested restricted stock outstanding at September 30, 2017 | 971 | $ | 53.32 | |||||
|
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|
|
AMETEK, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
(Unaudited)
Shares | Weighted Average Grant Date Fair Value | |||||||
(In thousands) | ||||||||
Nonvested restricted stock outstanding at December 31, 2018 | 891 | $ | 58.98 | |||||
Granted | 199 | 85.22 | ||||||
Vested | (268 | ) | 58.04 | |||||
Forfeited | (57 | ) | 63.26 | |||||
Nonvested restricted stock outstanding at June 30, 2019 | 765 | $ | 65.80 | |||||
Retirement and Pension Plans |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Defined benefit plans: | ||||||||||||||||
Service cost | $ | 1,919 | $ | 1,628 | $ | 5,657 | $ | 4,956 | ||||||||
Interest cost | 6,904 | 7,448 | 20,566 | 22,688 | ||||||||||||
Expected return on plan assets | (13,343 | ) | (12,693 | ) | (39,884 | ) | (38,639 | ) | ||||||||
Amortization of net actuarial loss and other | 3,512 | 2,484 | 10,536 | 7,452 | ||||||||||||
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|
|
| |||||||||
Pension income | (1,008 | ) | (1,133 | ) | (3,125 | ) | (3,543 | ) | ||||||||
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| |||||||||
Other plans: | ||||||||||||||||
Defined contribution plans | 5,830 | 5,660 | 18,788 | 18,537 | ||||||||||||
Foreign plans and other | 1,435 | 1,525 | 4,323 | 4,203 | ||||||||||||
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| |||||||||
Total other plans | 7,265 | 7,185 | 23,111 | 22,740 | ||||||||||||
|
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|
|
| |||||||||
Total net pension expense | $ | 6,257 | $ | 6,052 | $ | 19,986 | $ | 19,197 | ||||||||
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|
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands) | ||||||||||||||||
Defined benefit plans: | ||||||||||||||||
Service cost | $ | 1,702 | $ | 1,793 | $ | 3,415 | $ | 3,607 | ||||||||
Interest cost | 6,740 | 6,421 | 13,502 | 12,903 | ||||||||||||
Expected return on plan assets | (13,085 | ) | (14,884 | ) | (26,211 | ) | (29,847 | ) | ||||||||
Amortization of net actuarial loss and other | 4,649 | 2,952 | 7,936 | 5,904 | ||||||||||||
Pension expense (income) | 6 | (3,718 | ) | (1,358 | ) | (7,433 | ) | |||||||||
Other plans: | ||||||||||||||||
Defined contribution plans | 8,154 | 6,944 | 17,262 | 15,343 | ||||||||||||
Foreign plans and other | 1,543 | 1,587 | 3,105 | 3,183 | ||||||||||||
Total other plans | 9,697 | 8,531 | 20,367 | 18,526 | ||||||||||||
Total net pension expense | $ | 9,703 | $ | 4,813 | $ | 19,009 | $ | 11,093 | ||||||||
The Company provides limited warranties in connection with the sale2018.
September
2019
14. | Contingencies |
SeptemberJune 30, 2017,2019, the Company is named a Potentially Responsible Party (“PRP”) at 13
September
2019
The Company has two reportable segments, Electronic Instruments Group (“EIG”) and Electromechanical Group (“EMG”). The Company’s operating segments are identified based on the existence
At September 30, 2017, there were no significant changes in identifiable assets of reportable segments from the amounts disclosed at December 31, 2016, other than those described in the acquisitions footnote (Note 8), nor were there any significant changes in the basis of segmentation or in the measurement of segment operating results. Operating information relating to the Company’s reportable segments for the three and nine months ended September 30, 2017 and 2016 can be found in the table included in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report onForm 10-Q.
The Company had a Shareholder Rights Plan, which expired in June 2017. Under the Plan, the Company’s Board of Directors declared a dividend of one Right for each share of Company common stock owned at the close of business on June 2, 2007, and had authorized the issuance of one Right for each share of common stock of the Company issued between the Record Date and the Distribution Date. The Plan provided, under certain conditions involving acquisition of the Company’s common stock, that holders of Rights, except for the acquiring entity, would be entitled (i) to purchase shares of preferred stock at a specified exercise price, or (ii) to purchase shares of common stock of the Company, or the acquiring company, having a value of twice the Rights exercise price.
AMETEK, Inc.
Notes to Consolidated Financial Statements
September 30, 2017
(Unaudited)
During the fourth quarter of 2016, the Company recordedpre-tax restructuring charges totaling $25.6 million, which had the effect of reducing net income by $17.0 million. The restructuring charges were reported in the consolidated statement of income as follows: $24.0 million in Cost of sales and $1.6 million in Selling, general and administrative expenses. The restructuring charges were reported in segment operating income as follows: $12.4 million in EIG, $11.6 million in EMG and $1.6 million in corporate administrative expenses. The restructuring actions primarily related to $19.3 million in severance costs for a reduction in workforce and $6.2 million of asset write-downs in response to the impact of a weak global economy on certain of the Company’s businesses and the effects of a continued strong U.S. dollar. The restructuring activities will be broadly implemented across the Company’s various businesses through the end of 2017, with most actions expected to be completed in 2018.
During the fourth quarter of 2015, the Company recordedpre-tax restructuring charges totaling $20.7 million, which had the effect of reducing net income by $13.9 million. The restructuring charges were reported in the consolidated statement of income as follows: $20.0 million in Cost of sales and $0.7 million in Selling, general and administrative expenses. The restructuring charges were reported in segment operating income as follows: $9.3 million in EIG, $10.8 million in EMG and $0.7 million in corporate administrative expenses. The restructuring actions primarily related to a reduction in workforce in response to the impact of a weak global economy on certain of the Company’s businesses and the effects of a continued strong U.S. dollar. The restructuring activities have been broadly implemented across the Company’s various businesses with all actions expected to be completed in 2018.
Accrued liabilities in the Company’s consolidated balance sheet included amounts related to the fourth quarter of 2016 and fourth quarter of 2015 restructuring charges as follows (in millions):
Fourth Quarter of 2016 Restructuring | Fourth Quarter of 2015 Restructuring | |||||||
Balance at December 31, 2016 | $ | 19.2 | $ | 9.2 | ||||
Utilization | (5.4 | ) | (1.7 | ) | ||||
Foreign currency translation adjustments and other | 0.1 | (0.1 | ) | |||||
|
|
|
| |||||
Balance at September 30, 2017 | $ | 13.9 | $ | 7.4 | ||||
|
|
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|
Contents
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Net sales(1): | ||||||||||||||||
Electronic Instruments | $ | 671,606 | $ | 579,298 | $ | 1,949,038 | $ | 1,744,246 | ||||||||
Electromechanical | 413,193 | 365,732 | 1,208,047 | 1,122,888 | ||||||||||||
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Consolidated net sales | $ | 1,084,799 | $ | 945,030 | $ | 3,157,085 | $ | 2,867,134 | ||||||||
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Operating income and income before income taxes: | ||||||||||||||||
Segment operating income(2): | ||||||||||||||||
Electronic Instruments | $ | 164,448 | $ | 142,695 | $ | 486,385 | $ | 436,642 | ||||||||
Electromechanical | 84,059 | 71,439 | 248,968 | 231,181 | ||||||||||||
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Total segment operating income | 248,507 | 214,134 | 735,353 | 667,823 | ||||||||||||
Corporate administrative and other expenses | (15,676 | ) | (13,018 | ) | (49,839 | ) | (39,148 | ) | ||||||||
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Consolidated operating income | 232,831 | 201,116 | 685,514 | 628,675 | ||||||||||||
Interest and other expenses, net | (28,404 | ) | (26,868 | ) | (86,310 | ) | (80,824 | ) | ||||||||
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Consolidated income before income taxes | $ | 204,427 | $ | 174,248 | $ | 599,204 | $ | 547,851 | ||||||||
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands) | ||||||||||||||||
Net sales: | ||||||||||||||||
Electronic Instruments | $ | 820,247 | $ | 744,458 | $ | 1,627,158 | $ | 1,460,884 | ||||||||
Electromechanical | 469,165 | 464,477 | 949,945 | 920,698 | ||||||||||||
Consolidated net sales | $ | 1,289,412 | $ | 1,208,935 | $ | 2,577,103 | $ | 2,381,582 | ||||||||
Operating income and income before income taxes: | ||||||||||||||||
Segment operating income: | ||||||||||||||||
Electronic Instruments | $ | 212,913 | $ | 193,831 | $ | 415,997 | $ | 377,190 | ||||||||
Electromechanical | 101,065 | 94,250 | 199,878 | 185,252 | ||||||||||||
Total segment operating income | 313,978 | 288,081 | 615,875 | 562,442 | ||||||||||||
Corporate administrative expenses | (18,568 | ) | (17,995 | ) | (37,206 | ) | (34,188 | ) | ||||||||
Consolidated operating income | 295,410 | 270,086 | 578,669 | 528,254 | ||||||||||||
Interest expense | (21,475 | ) | (20,784 | ) | (44,128 | ) | (42,470 | ) | ||||||||
Other expense, net | (3,337 | ) | (1,081 | ) | (7,004 | ) | (1,739 | ) | ||||||||
Consolidated income before income taxes | $ | 270,599 | $ | 248,221 | $ | 527,537 | $ | 484,045 | ||||||||
remainder of the Company’s 2019 results.
For 2017, the strengthening global economic environmentsecond quarter of 2019 was $215.5 million, an increase of $21.6 million or 11.1%, compared with $193.9 million for the second quarter of 2018.
ResultsGroup’s Operational Excellence initiatives.
2018
As a result, the Company’s backlog of unfilled orders at June 30, 2019 was $1,681.2 million, an increase of $79.1 million or 4.9%, compared with $1,602.1 million at December 31, 2018.
above, as well as the benefits of the Company’s Operational Excellence initiatives.
2018, and $65 million in aggregate principal amount of 7.18% private placement senior notes in the fourth quarter of 2018.
2018.
Results2018.
translation.
Operational Excellence initiatives.
Results of operations for the first nine months of 2017 compared with the first nine months of 2016
Net sales for the first nine months of 2017 were $3,157.1 million, an increase of $290.0 million or 10.1%, compared with net sales of $2,867.1 million for the first nine months of 2016. The increase in net sales for the first nine months of 2017 was due to a 6% increase from acquisitions and 5% organic sales growth, partially offset by an unfavorable 1% effect of foreign currency translation.
Total international sales for the first nine months of 2017 were $1,615.1 million or 51.2% of net sales, an increase of $110.4 million or 7.3%, compared with international sales of $1,504.7 million or 52.5% of net sales for the first nine months of 2016. The $110.4 million increase in international sales was primarily driven by organic sales growth. Both reportable segments of the Company maintain strong international sales presences in Europe and Asia.
Orders for the first nine months of 2017 were $3,379.7 million, an increase of $503.2 million or 17.5%, compared with $2,876.5 million for the first nine months of 2016. The increase in orders for the first nine months of 2017 was due to 10% organic order growth, a 7% increase from acquisitions and favorable 1% effect of foreign currency translation. As a result, the Company’s backlog of unfilled orders was a record at September 30, 2017 of $1,379.2 million, an increase of $222.7 million or 19.3%, compared with $1,156.5 million at December 31, 2016.
Segment operating income for the first nine months of 2017 was $735.4 million, an increase of $67.6 million or 10.1%, compared with segment operating income of $667.8 million for the first nine months of 2016. Segment operating income, as a percentage of net sales, was 23.3% for both the first nine months of 2017 and 2016. The increase in segment operating income for the first nine months of 2017 resulted primarily from the increase in net sales noted above.
Cost of sales for the first nine months of 2017 was $2,084.4 million or 66.0% of net sales, an increase of $190.3 million or 10.0%, compared with $1,894.1 million or 66.1% of net sales for the first nine months of 2016. The cost of sales increase for the first nine months of 2017 was affected by the net sales increase noted above.
Results of Operations (continued)
SG&A expenses for the first nine months of 2017 were $387.2 million or 12.3% of net sales, an increase of $42.9 million or 12.5%, compared with $344.3 million or 12.0% of net sales for the first nine months of 2016. SG&A expenses increased primarily due to the higher sales mentioned above and a second quarter of 2017 $2.5 million equity-based compensation charge related to the accelerated vesting of restricted stock grants in association with the retirement of the Company’s Executive Chairman of the Board of Directors.
Consolidated operating income was $685.5 million or 21.7% of net sales for the first nine months of 2017, an increase of $56.8 million or 9.0%, compared with $628.7 million or 21.9% of net sales for the first nine months of 2016.
The effective tax rate for the first nine months of 2017 was 26.1%, compared with 26.4% for the first nine months of 2016. The effective tax rates for the first nine months of 2017 and 2016 reflect the impact of foreign earnings, which are taxed at lower rates, tax benefits related to international and state tax planning initiatives and the release of uncertain tax position liabilities relating to certain statute expirations. The first nine months of 2017 effective tax rate reflects $11.4 million of tax benefits related to share-based payment transactions in accordance with the January 1, 2017 adoption ofASU 2016-09. See Note 2 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report onForm 10-Q for further details.
Net income for the first nine months of 2017 was $442.9 million, an increase of $39.8 million or 9.9%, compared with $403.1 million for the first nine months of 2016.
Diluted earnings per share for the first nine months of 2017 were $1.91, an increase of $0.19 or 11.0%, compared with $1.72 per diluted share for the first nine months of 2016.
Segment Results
EIG’s netsales totaled $1,949.0 million for the first nine months of 2017, an increase of $204.8 million or 11.7%, compared with $1,744.2 million for the first nine months of 2016. The net sales increase was due to a 9% increase from the 2017 acquisitions of MOCON and Rauland and 2016 acquisitions of HS Foils, Nu Instruments, Brookfield and ESP/SurgeX, and 4% organic sales growth. Foreign currency translation was essentially flat period over period.
EIG’s operating income was $486.4 million for the first nine months of 2017, an increase of $49.8 million or 11.4%, compared with $436.6 million for the first nine months of 2016. The increase in EIG’s operating income for the first nine months of 2017 was primarily due to the higher sales mentioned above, as well as the benefits of the Group’s Operational Excellence initiatives. EIG’s operating margins were 25.0% of net sales for both the first nine months of 2017 and 2016.
EMG’s net sales totaled $1,208.0 million for the first nine months of 2017, an increase of $85.1 million or 7.6%, compared with $1,122.9 million for the first nine months of 2016. The net sales increase was due to 7% organic sales growth and a 2% increase from the 2016 acquisition of Laserage, partially offset by an unfavorable 1% effect of foreign currency translation.
EMG’s operating income was $249.0 million for the first nine months of 2017, an increase of $17.8 million or 7.7%, compared with $231.2 million for the first nine months of 2016. The increase in EMG’s operating income for the first nine months of 2017 was primarily due to the higher sales mentioned above, as well as the benefits of the Group’s Operational Excellence initiatives. EMG’s operating margins were 20.6% of net sales for both the first nine months of 2017 and 2016.
Free cash flow (cash flow provided by operatingincome.
Cash used for investing activities totaled $562.4 million for the first nine months of 2017, compared with $400.0 million for the first nine months of 2016. For the first nine months of 2017, the Company paid $518.6 million, net of cash acquired, to acquire MOCON in June 2017 and Rauland in February 2017. For the first nine months of 2016, the Company paid $360.0 million, net of cash acquired, to acquire HS Foils and Nu Instruments in July 2016, and Brookfield and ESP/SurgeX in January 2016. Additions to property, plant and equipment totaled $45.6 million for the first nine months of 2017, compared with $40.5 million for the first nine months of 2016.
Cash used for financing activities totaled $43.0 million for the first nine months of 2017, compared with $41.4 million for the first nine months of 2016. For the first nine months of 2017, short-termpay down domestic borrowings decreased $9.6 million, compared with an increase of $237.1 million for the first nine months of 2016. At September 30, 2017, the Company had available borrowing capacity of $1,110.5 million under its revolving credit facility, including the $300 million accordion feature.
For the first nine months of 2017, the Company repurchased approximately 112,000 shares of its common stock for $6.7 million, compared with $236.1 million used for repurchases of approximately 4,995,000 shares for the first nine months of 2016. At September 30, 2017, $368.9 million was available under the Company’s Board of Directors authorization for future share repurchases.
At September 30, 2017, total debt, net was $2,430.4 million, compared with $2,341.6 million at December 31, 2016. In the fourth quarter of 2017, $270 million of 6.20% senior notes will mature and become payable. revolving credit facility.
Item 4. | Controls and Procedures |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Period | Total Number of Shares Purchased (1)(2) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan (2) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan | ||||||||||||
July 1, 2017 to July 31, 2017 | 20,306 | $ | 61.55 | 20,306 | $ | 368,870,746 | ||||||||||
August 1, 2017 to August 31, 2017 | 106 | 61.58 | 106 | 368,864,218 | ||||||||||||
September 1, 2017 to September 30, 2017 | — | — | — | 368,864,218 | ||||||||||||
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Total | 20,412 | 61.55 | 20,412 | |||||||||||||
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Period | Total Number of Shares Purchased (1)(2) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan (2) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan | ||||||||||||
April 1, 2019 to April 30, 2019 | — | $ | — | — | $ | 500,912,305 | ||||||||||
May 1, 2019 to May 31, 2019 | 72,045 | 85.50 | 72,045 | 494,752,129 | ||||||||||||
June 1, 2019 to June 30, 2019 | 283 | 86.48 | 283 | 494,727,655 | ||||||||||||
Total | 72,328 | 85.51 | 72,328 | |||||||||||||
(1) | Represents shares surrendered to the Company to satisfy tax withholding obligations in connection with employees’ share-based compensation awards. |
(2) | Consists of the number of shares purchased pursuant to the Company’s Board of Directors |
Item 6. | Exhibits |
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Exhibit Number | Description | |||
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31.1* | ||||
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31.2* | ||||
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32.1* | ||||
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32.2* | ||||
101.INS* | XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||
101.SCH* | XBRL Taxonomy Extension Schema Document. | |||
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document. | |||
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document. | |||
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document. | |||
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document. |
* | Filed electronically herewith. |
AMETEK, Inc. | ||
(Registrant) | ||
By: | /s/ Thomas M. | |
Thomas M. Montgomery | ||
Senior Vice President – Comptroller | ||
(Principal Accounting Officer) |
November
27