10-QPeriod: Q2 FY2018

AMETEK INC/ Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 2, 2018For Securities:AME

Summary

AMETEK, Inc. (AME) reported strong financial results for the second quarter and first six months of 2018, demonstrating significant growth driven by both organic sales and strategic acquisitions. Net sales increased by 13.6% to $1.21 billion in Q2 2018 and by 14.9% to $2.38 billion in the first six months of 2018, compared to the prior year periods. This growth was supported by solid order increases and margin expansion, with operating income rising 17.7% in Q2 and 18.2% in the year-to-date period. Profitability also saw substantial improvement, with net income up 28.8% to $193.9 million in Q2 and 29.6% to $375.2 million in the year-to-date. Diluted EPS followed suit, increasing by 27.7% to $0.83 in Q2 and 28.8% to $1.61 in the year-to-date. The company successfully integrated several acquisitions, including FMH Aerospace, SoundCom Systems, and Motec GmbH, which contributed positively to revenue. AMETEK also reported a lower effective tax rate due to the U.S. Tax Cuts and Jobs Act, further boosting net income.

Financial Highlights

51 data points
Beta

Revenue

$1.21B

34.5% Gross Margin

Net Income

$193.86M

16.0% Net Margin

EPS (Diluted)

$0.83

Total Assets

$8.15B

Cash & Equivalents

$557.69M

Free Cash Flow

$186.84M

Financial Statements
Beta
Revenue$1.21B
Cost of Revenue$791.25M
Gross Profit$417.69M
SG&A Expenses$147.60M
Operating Expenses$938.85M
Operating Income$270.09M
Interest Expense$20.78M
Net Income$193.86M
EPS (Basic)$0.84
EPS (Diluted)$0.83
Shares Outstanding (Basic)231.25M
Shares Outstanding (Diluted)233.30M

Key Highlights

  • 1Strong revenue growth in Q2 2018 ($1.21B, +13.6% YoY) and YTD 2018 ($2.38B, +14.9% YoY), driven by organic growth and acquisitions.
  • 2Significant increase in operating income and margins across both segments (EIG and EMG).
  • 3Net income grew substantially, up 28.8% in Q2 to $193.9M and 29.6% YTD to $375.2M.
  • 4Diluted EPS also showed strong performance, rising 27.7% in Q2 to $0.83 and 28.8% YTD to $1.61.
  • 5Acquisitions in early 2018 (FMH, SoundCom, Motec) are being integrated and contributing to top-line growth.
  • 6Lower effective tax rate in 2018 due to the U.S. Tax Cuts and Jobs Act positively impacted net income.
  • 7Company generated robust operating cash flow ($380.5M YTD) and maintained a healthy backlog ($1.59B).

Frequently Asked Questions

AMETEK's revenue growth was primarily driven by a combination of organic sales growth across both the Electronic Instruments Group (EIG) and Electromechanical Group (EMG) segments, and contributions from recent acquisitions, including FMH Aerospace, SoundCom Systems, and Motec GmbH. Favorable foreign currency translation also played a role.

The U.S. Tax Cuts and Jobs Act led to a reduction in the U.S. corporate income tax rate, which resulted in a lower effective tax rate for AMETEK in 2018. This tax benefit positively impacted the company's net income and diluted earnings per share for both the second quarter and the first six months of the year.

AMETEK continues to pursue a strategy of acquiring businesses that complement its existing product lines and market presence. The acquisitions made in early 2018 are being integrated and are contributing to revenue growth. The company noted that these acquisitions had an immaterial impact on reported net sales, net income, and diluted EPS for the current periods, suggesting a smooth integration process.

AMETEK has been actively managing its debt, with total debt decreasing slightly from December 31, 2017, to June 30, 2018. The company also increased its quarterly cash dividend by 56%. The debt-to-capital ratio and net debt-to-capital ratio remain at manageable levels, indicating a healthy capital structure. The company also has significant available borrowing capacity under its revolving credit facility.