10-QPeriod: Q2 FY2017

AMETEK INC/ Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 2, 2017For Securities:AME

Summary

AMETEK, Inc. reported a solid second quarter and first half of 2017, demonstrating consistent growth in both revenue and earnings. Net sales increased by 8.9% for the quarter and 7.8% for the six months compared to the prior year, driven by a combination of organic growth and strategic acquisitions. The company successfully integrated two significant acquisitions in early 2017, Rauland-Borg Corporation and MOCON, Inc., which contributed positively to sales. Profitability remained strong, with operating income and net income showing healthy increases, and diluted earnings per share saw a notable rise of 10.2% for the quarter. Key financial indicators like operating income and net income have improved year-over-year, reflecting the company's ability to drive growth and manage expenses effectively across its Electronic Instruments Group (EIG) and Electromechanical Group (EMG) segments. The company also reported record orders and a record backlog at the end of the second quarter, suggesting continued positive momentum. Despite increased investments in acquisitions and a slightly higher SG&A expense ratio driven partly by one-time charges and acquisition integration, AMETEK maintained a strong financial position with robust operating cash flow and available credit facilities.

Financial Highlights

51 data points
Beta

Revenue

$1.06B

34.3% Gross Margin

Net Income

$150.48M

14.1% Net Margin

EPS (Diluted)

$0.65

Total Assets

$7.54B

Cash & Equivalents

$516.48M

Free Cash Flow

$184.69M

Financial Statements
Beta
Revenue$1.06B
Cost of Revenue$699.74M
Gross Profit$364.87M
SG&A Expenses$132.86M
Operating Expenses$835.05M
Operating Income$229.55M
Interest Expense$24.55M
Net Income$150.48M
EPS (Basic)$0.65
EPS (Diluted)$0.65
Shares Outstanding (Basic)230.16M
Shares Outstanding (Diluted)231.59M

Key Highlights

  • 1Net sales for Q2 2017 increased by 8.9% to $1,064.6 million, and by 7.8% for the six months to $2,072.3 million, compared to the prior year periods.
  • 2Diluted earnings per share (EPS) grew by 10.2% in Q2 2017 to $0.65 and by 7.8% for the six months to $1.25.
  • 3The company completed two significant acquisitions in early 2017: Rauland-Borg Corporation (February) and MOCON, Inc. (June), which contributed to sales growth.
  • 4Orders increased significantly by 20.4% in Q2 2017 and 18.1% for the six months, resulting in a record backlog of $1,341.9 million as of June 30, 2017.
  • 5Operating income increased by 6.1% in Q2 2017 to $232.4 million and by 5.9% for the six months to $452.7 million.
  • 6Cash provided by operating activities remained strong at $341.4 million for the first six months of 2017, with free cash flow at $313.7 million.
  • 7The Electronic Instruments Group (EIG) saw strong sales growth of 10.4% in Q2 2017, driven by acquisitions and organic growth.

Frequently Asked Questions

Revenue growth in the second quarter of 2017 was driven by a combination of factors, including a 6% contribution from recent acquisitions (Rauland-Borg and MOCON) and 4% organic sales growth. This was partially offset by a 1% negative impact from foreign currency translation.

The acquisitions of Rauland-Borg Corporation (February 2017) and MOCON, Inc. (June 2017) contributed to the reported sales increase. While these acquisitions added to revenue, the Electronic Instruments Group (EIG) experienced a slight decrease in operating margins due to the acquisitions having lower margins than the group's base businesses. The company is in the process of finalizing purchase price allocations for these acquisitions.

The company reported strong order growth in the second quarter of 2017, with orders increasing by 20.4% year-over-year. This robust order intake led to a record backlog of $1,341.9 million as of June 30, 2017, which is a 16.0% increase from December 31, 2016. This indicates a positive outlook and strong demand for AMETEK's products, suggesting continued growth momentum for the remainder of 2017.

AMETEK generated $341.4 million in cash from operating activities for the first six months of 2017, maintaining a similar level to the prior year. Free cash flow was strong at $313.7 million. The company used significant cash for acquisitions ($518.6 million), which was partially funded by operating cash flow and a decrease in short-term borrowings. Total debt remained substantial, but the debt-to-capital ratio improved slightly to 40.1% from 41.8% at the end of 2016, indicating prudent financial management.