10-QPeriod: Q3 FY2016

AMETEK INC/ Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 3, 2016For Securities:AME

Summary

AMETEK, Inc. reported declining net sales and income for the third quarter and the first nine months of 2016 compared to the prior year. This performance was primarily attributed to a weak global economy and the strong U.S. dollar, which impacted certain business segments like Process, Engineered Materials, and Floor Care. Despite these headwinds, the company successfully integrated four acquisitions made in early and mid-2016, contributing positively to revenue and orders. Strategic financial maneuvers, including debt refinancing and a significant new private placement of senior notes, were undertaken to enhance financial flexibility and support future growth strategies. While top-line performance faced challenges, the company demonstrated resilience through active management of costs and strategic investments. The company's financial position remains solid, with strong operating cash flow generation and sufficient liquidity. Investors should note the ongoing integration of acquisitions and the company's proactive approach to managing its capital structure as key factors moving forward.

Financial Highlights

50 data points
Beta

Revenue

$945.03M

33.3% Gross Margin

Net Income

$130.69M

13.8% Net Margin

EPS (Diluted)

$0.56

Total Assets

$6.98B

Cash & Equivalents

$445.47M

Free Cash Flow

$153.71M

Financial Statements
Beta
Revenue$945.03M
Cost of Revenue$630.74M
Gross Profit$314.29M
SG&A Expenses$113.17M
Operating Expenses$743.91M
Operating Income$201.12M
Interest Expense$23.61M
Net Income$130.69M
EPS (Basic)$0.56
EPS (Diluted)$0.56
Shares Outstanding (Basic)231.89M
Shares Outstanding (Diluted)232.72M

Key Highlights

  • 1Net sales decreased by 5.4% to $945.0 million for Q3 2016 and by 4.0% to $2,867.1 million for the nine months ended September 30, 2016, year-over-year.
  • 2Diluted EPS decreased to $0.56 for Q3 2016 and $1.72 for the nine months ended September 30, 2016, compared to $0.65 and $1.87 respectively in the prior year periods.
  • 3The company completed four acquisitions in 2016, contributing to order growth despite an overall internal sales decline.
  • 4Operating income for both segments, Electronic Instruments Group (EIG) and Electromechanical Group (EMG), saw declines due to lower sales and margin compression.
  • 5Cash provided by operating activities increased by 7.7% to $509.5 million for the nine months ended September 30, 2016.
  • 6AMETEK secured an $850 million revolving credit facility maturing in March 2021 and completed a significant multi-currency private placement of senior notes in October 2016.
  • 7The company continued its share repurchase program, buying back approximately 5 million shares for $236.1 million in the first nine months of 2016.

Frequently Asked Questions

The primary driver for the decrease in net sales was a combination of a weak global economy and the effects of a continued strong U.S. dollar, which negatively impacted sales in specific business lines such as Process businesses with oil and gas market exposure, and Engineered Materials, Interconnects, and Packaging businesses with metals market exposure.

The company acquired four businesses in 2016 (Brookfield, ESP/SurgeX, HS Foils, and Nu Instruments). These acquisitions contributed positively to order growth and partially offset the internal sales decline, helping to mitigate the overall impact of the challenging economic environment. The acquisitions are part of AMETEK's strategy to acquire differentiated businesses.

As of September 30, 2016, AMETEK had $445.5 million in cash and cash equivalents, an increase from $381.0 million at the end of 2015. Total debt, net, was $2,154.4 million, resulting in a debt-to-capital ratio of 39.0%. The company also has an $850 million revolving credit facility and secured additional financing through a multi-currency private placement of senior notes, indicating a strong liquidity position and financial flexibility.

AMETEK actively engaged in its share repurchase program, repurchasing approximately 5 million shares for $236.1 million during the first nine months of 2016. The Board of Directors also approved an increase of $400 million to the share repurchase authorization in November 2016, signaling continued commitment to returning capital to shareholders.