10-QPeriod: Q3 FY2020

AMETEK INC/ Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 29, 2020For Securities:AME

Summary

AMETEK, Inc. (AME) reported its third-quarter and year-to-date results for the period ending September 30, 2020. While facing a challenging economic environment due to the COVID-19 pandemic, the company demonstrated resilience with a slight increase in net income for the nine-month period. Despite a notable decline in net sales for both the quarter and year-to-date compared to 2019, driven by organic sales declines and the divestiture of Reading Alloys, strategic initiatives and acquisitions helped to mitigate the impact. Key financial highlights include strong operating cash flow generation, which increased significantly year-over-year, and a healthy free cash flow. The company also successfully integrated recent acquisitions and completed the sale of a non-core business, contributing positively to its financial position. AMETEK is managing its costs effectively, as evidenced by the decrease in SG&A expenses as a percentage of net sales and improvements in operating margins in some segments, demonstrating its commitment to operational excellence amidst global economic headwinds. The company maintained a strong balance sheet with increased cash and cash equivalents, underscoring its financial stability.

Financial Highlights

54 data points
Beta

Revenue

$1.13B

35.0% Gross Margin

Net Income

$204.58M

18.2% Net Margin

EPS (Diluted)

$0.88

Total Assets

$10.43B

Cash & Equivalents

$1.30B

Free Cash Flow

$299.58M

Financial Statements
Beta
Revenue$1.13B
Cost of Revenue$732.71M
Gross Profit$394.24M
SG&A Expenses$123.50M
Operating Expenses$856.20M
Operating Income$270.74M
Interest Expense$21.19M
Net Income$204.58M
EPS (Basic)$0.89
EPS (Diluted)$0.88
Shares Outstanding (Basic)229.58M
Shares Outstanding (Diluted)231.46M

Key Highlights

  • 1For the nine months ended September 30, 2020, Net Income increased by 1.7% to $651.4 million compared to $640.5 million in the prior year.
  • 2Consolidated Net Sales decreased by 11.7% to $1,126.9 million for Q3 2020 and by 13.3% to $3,341.1 million for the nine months ended Q3 2020, primarily due to COVID-19 impacts and the Reading divestiture.
  • 3Operating cash flow for the first nine months of 2020 increased by 15.9% to $895.1 million, indicating strong working capital management.
  • 4The company completed the sale of its Reading Alloys business in March 2020, generating $245.3 million in net cash proceeds and a pre-tax gain of $141.0 million.
  • 5Realignment costs of $43.9 million were recorded in the first nine months of 2020, primarily due to workforce reductions and inventory write-downs in response to the pandemic, with expected annualized cash savings of $86 million.
  • 6Cash and cash equivalents significantly increased to $1,304.8 million as of September 30, 2020, from $393.0 million at December 31, 2019.
  • 7Diluted earnings per share for the nine months ended September 30, 2020, slightly increased to $2.82 from $2.79 in the prior year.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted AMETEK's performance, leading to a decrease in consolidated net sales for both the third quarter (down 11.7%) and the first nine months (down 13.3%) of 2020 compared to the prior year. This was largely due to organic sales declines and a weak global economy. The company implemented enhanced safety measures and adapted operations to maintain business continuity.

The primary driver for the decrease in net sales was a challenging global economy exacerbated by the COVID-19 pandemic, coupled with the unfavorable impact of the Reading Alloys divestiture. While sales declined, segment operating margins showed resilience and even improvement in some areas due to operational excellence initiatives and realignment actions. The sale of Reading Alloys also contributed a significant gain to 'Other income, net'.

AMETEK demonstrated strong financial management. Operating cash flow increased by 15.9% for the first nine months of 2020 due to effective working capital management. The company also saw a substantial increase in its cash and cash equivalents, rising to $1.3 billion from $393 million at the end of 2019. The divestiture of Reading Alloys provided a significant cash inflow, and the company maintained a healthy debt-to-capital ratio.

AMETEK acquired IntelliPower in January 2020, which contributed positively to the third-quarter results. The company also completed the sale of its Reading Alloys business in March 2020 for $245.3 million in cash, resulting in a pre-tax gain of $141.0 million. These strategic moves reflect portfolio management in response to market conditions.