10-QPeriod: Q2 FY2014

AMETEK INC/ Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 6, 2014For Securities:AME

Summary

AMETEK, Inc. reported a strong second quarter and first half of 2014, demonstrating robust growth driven by both organic sales and strategic acquisitions. Net sales increased significantly year-over-year, with notable contributions from the Electronic Instruments Group (EIG) and Electromechanical Group (EMG). The company achieved record levels in orders, sales, operating income, net income, and diluted earnings per share for the quarter. Significant investments were made in acquisitions during the first half of the year, totaling $458.7 million, focused on enhancing the company's capabilities in test and measurement and optical metrology, which are expected to drive future growth. Financially, AMETEK maintained a healthy operational cash flow, which was primarily utilized for these acquisitions and increased dividend payments. The company also reported a slight increase in debt to fund these investments, but its debt-to-capital ratio remained within manageable levels. Management expressed confidence in the company's ability to meet its financial obligations and pursue its growth strategies, supported by strong cash generation, available credit facilities, and access to capital markets.

Financial Highlights

48 data points
Beta

Revenue

$990.72M

Net Income

$150.06M

15.1% Net Margin

EPS (Diluted)

$0.61

Total Assets

$6.49B

Cash & Equivalents

$282.77M

Free Cash Flow

$140.25M

Financial Statements
Beta
Revenue$990.72M
SG&A Expenses$113.32M
Operating Expenses$758.99M
Operating Income$231.73M
Interest Expense$18.98M
Net Income$150.06M
EPS (Basic)$0.61
EPS (Diluted)$0.61
Shares Outstanding (Basic)245.20M
Shares Outstanding (Diluted)247.40M

Key Highlights

  • 1Net sales for the second quarter of 2014 increased by 12.7% to $990.7 million compared to $878.8 million in the prior year, driven by 4% internal sales growth and 8% from acquisitions.
  • 2Diluted earnings per share (EPS) rose by 17.3% to $0.61 in Q2 2014 from $0.52 in Q2 2013, indicating strong profitability.
  • 3The company completed four significant acquisitions in the first half of 2014 for $458.7 million, including Teseq Group, VTI Instruments, Luphos GmbH, and Zygo Corporation, expanding its Electronic Instruments Group.
  • 4New orders in the second quarter of 2014 increased by 20.5% to $1,078.6 million, resulting in a record backlog of $1,251.0 million at June 30, 2014.
  • 5Operating income for the quarter increased by 14.4% to $231.7 million, with operating margins slightly improving to 23.4% from 23.1% in the prior year.
  • 6Cash provided by operating activities increased by 10.9% to $316.0 million for the first six months of 2014, while free cash flow was $286.8 million.
  • 7AMETEK increased its quarterly cash dividend by 50% to $0.09 per share in May 2014.

Frequently Asked Questions

Revenue growth in the second quarter of 2014 was driven by a combination of factors: a 4% internal sales growth, contributions from recent acquisitions (adding approximately 8%), and a favorable 1% impact from foreign currency translation. Strong order rates across both the Electronic Instruments Group (EIG) and Electromechanical Group (EMG) supported this revenue increase.

AMETEK has actively pursued acquisitions, notably spending $458.7 million in the first half of 2014 on four companies. These acquisitions, particularly in the test and measurement and optical metrology sectors, have significantly contributed to revenue growth and expanded the company's market reach within its Electronic Instruments Group. While some recent acquisitions initially have lower operating margins, the company expects them to contribute positively to overall results in the long term, supported by Operational Excellence initiatives.

AMETEK reported strong cash flow from operations, which increased by 10.9% in the first six months of 2014. This cash flow, along with available credit facilities and access to capital markets, is expected to be sufficient to meet operating needs and contractual obligations. The company increased its debt to fund acquisitions, but its debt-to-capital ratio remained stable and manageable at 31.9% as of June 30, 2014. Management expressed confidence in its ability to continue its growth trajectory and meet financial commitments.

The recent acquisitions have contributed to increased operating income due to higher sales volumes. However, the operating margins for the Electronic Instruments Group (EIG) saw a slight decrease from 26.8% to 26.4% in Q2 2014. Management attributes this to the integration of recent acquisitions, which, on average, have lower operating margins than the group's established businesses. This effect was partially offset by the benefits from the company's Operational Excellence initiatives.