☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2019
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware |
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1100 Cassatt Road Berwyn, Pennsylvania | 19312-1177 | |
(Address of principal executive offices) | (Zip Code) |
(§Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock | AME | New York Stock Exchange |
AMETEK, Inc.
Form10-Q
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Item 1. | Financial Statements |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net sales | $ | 1,192,962 | $ | 1,084,799 | $ | 3,574,544 | $ | 3,157,085 | ||||||||
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Cost of sales | 782,994 | 722,127 | 2,351,042 | 2,091,720 | ||||||||||||
Selling, general and administrative | 144,702 | 132,634 | 429,982 | 388,331 | ||||||||||||
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Total operating expenses | 927,696 | 854,761 | 2,781,024 | 2,480,051 | ||||||||||||
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Operating income | 265,266 | 230,038 | 793,520 | 677,034 | ||||||||||||
Interest expense | (19,391 | ) | (24,709 | ) | (61,861 | ) | (73,777 | ) | ||||||||
Other expense, net | (945 | ) | (902 | ) | (2,684 | ) | (4,053 | ) | ||||||||
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Income before income taxes | 244,930 | 204,427 | 728,975 | 599,204 | ||||||||||||
Provision for income taxes | 53,717 | 50,896 | 162,562 | 156,266 | ||||||||||||
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Net income | $ | 191,213 | $ | 153,531 | $ | 566,413 | $ | 442,938 | ||||||||
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Basic earnings per share | $ | 0.83 | $ | 0.67 | $ | 2.45 | $ | 1.93 | ||||||||
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Diluted earnings per share | $ | 0.82 | $ | 0.66 | $ | 2.43 | $ | 1.91 | ||||||||
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Weighted average common shares outstanding: | ||||||||||||||||
Basic shares | 231,502 | 230,439 | 231,227 | 230,049 | ||||||||||||
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Diluted shares | 233,250 | 232,253 | 233,171 | 231,615 | ||||||||||||
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Dividends declared and paid per share | $ | 0.14 | $ | 0.09 | $ | 0.42 | $ | 0.27 | ||||||||
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Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net sales | $ | 1,289,412 | $ | 1,208,935 | $ | 2,577,103 | $ | 2,381,582 | ||||||||
Cost of sales | 838,153 | 791,248 | 1,689,460 | 1,568,048 | ||||||||||||
Selling, general and administrative | 155,849 | 147,601 | 308,974 | 285,280 | ||||||||||||
Total operating expenses | 994,002 | 938,849 | 1,998,434 | 1,853,328 | ||||||||||||
Operating income | 295,410 | 270,086 | 578,669 | 528,254 | ||||||||||||
Interest expense | (21,475 | ) | (20,784 | ) | (44,128 | ) | (42,470 | ) | ||||||||
Other expense, net | (3,336 | ) | (1,081 | ) | (7,004 | ) | (1,739 | ) | ||||||||
Income before income taxes | 270,599 | 248,221 | 527,537 | 484,045 | ||||||||||||
Provision for income taxes | 55,096 | 54,361 | 107,766 | 108,845 | ||||||||||||
Net income | $ | 215,503 | $ | 193,860 | $ | 419,771 | $ | 375,200 | ||||||||
Basic earnings per share | $ | 0.95 | $ | 0.84 | $ | 1.85 | $ | 1.62 | ||||||||
Diluted earnings per share | $ | 0.94 | $ | 0.83 | $ | 1.83 | $ | 1.61 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic shares | 227,577 | 231,252 | 227,219 | 231,090 | ||||||||||||
Diluted shares | 229,328 | 233,297 | 229,007 | 233,131 | ||||||||||||
Dividends declared and paid per share | $ | 0.14 | $ | 0.14 | $ | 0.28 | $ | 0.28 | ||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Total comprehensive income | $ | 189,089 | $ | 185,167 | $ | 539,385 | $ | 522,665 | ||||||||
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Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Total comprehensive income | $ | 219,752 | $ | 154,538 | $ | 435,033 | $ | 350,296 | ||||||||
September 30, | December 31, | |||||||
2018 | 2017 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 518,721 | $ | 646,300 | ||||
Receivables, net | 714,929 | 668,176 | ||||||
Inventories, net | 620,149 | 540,504 | ||||||
Other current assets | 144,816 | 79,675 | ||||||
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Total current assets | 1,998,615 | 1,934,655 | ||||||
Property, plant and equipment, net | 487,425 | 493,296 | ||||||
Goodwill | 3,263,663 | 3,115,619 | ||||||
Other intangibles, net | 2,101,554 | 2,013,365 | ||||||
Investments and other assets | 256,786 | 239,129 | ||||||
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Total assets | $ | 8,108,043 | $ | 7,796,064 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term borrowings and current portion of long-term debt, net | $ | 68,722 | $ | 308,123 | ||||
Accounts payable | 389,130 | 437,329 | ||||||
Customer advanced payments | 137,094 | — | ||||||
Income taxes payable | 45,018 | 34,660 | ||||||
Accrued liabilities | 329,937 | 358,551 | ||||||
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Total current liabilities | 969,901 | 1,138,663 | ||||||
Long-term debt, net | 1,832,547 | 1,866,166 | ||||||
Deferred income taxes | 554,044 | 512,526 | ||||||
Other long-term liabilities | 239,642 | 251,076 | ||||||
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Total liabilities | 3,596,134 | 3,768,431 | ||||||
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Stockholders’ equity: | ||||||||
Common stock | 2,640 | 2,631 | ||||||
Capital in excess of par value | 697,894 | 660,894 | ||||||
Retained earnings | 5,474,070 | 5,002,419 | ||||||
Accumulated other comprehensive loss | (456,204) | (429,176 | ) | |||||
Treasury stock | (1,206,491 | ) | (1,209,135 | ) | ||||
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Total stockholders’ equity | 4,511,909 | 4,027,633 | ||||||
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Total liabilities and stockholders’ equity | $ | 8,108,043 | $ | 7,796,064 | ||||
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June 30, | December 31, | |||||||
2019 | 2018 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 567,912 | $ | 353,975 | ||||
Receivables, net | 757,522 | 732,839 | ||||||
Inventories, net | 634,138 | 624,744 | ||||||
Other current assets | 167,581 | 124,586 | ||||||
Total current assets | 2,127,153 | 1,836,144 | ||||||
Property, plant and equipment, net | 538,256 | 554,130 | ||||||
Right of use assets, net | 182,902 | — | ||||||
Goodwill | 3,613,182 | 3,612,033 | ||||||
Other intangibles, net | 2,338,511 | 2,403,771 | ||||||
Investments and other assets | 269,598 | 256,210 | ||||||
Total assets | $ | 9,069,602 | $ | 8,662,288 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term borrowings and current portion of long-term debt, net | $ | 98,356 | $ | 358,876 | ||||
Accounts payable | 390,443 | 399,571 | ||||||
Customer advanced payments | 140,635 | 137,229 | ||||||
Income taxes payable | 33,029 | 48,597 | ||||||
Accrued liabilities and other | 316,095 | 314,431 | ||||||
Total current liabilities | 978,558 | 1,258,704 | ||||||
Long-term debt, net | 2,368,690 | 2,273,837 | ||||||
Deferred income taxes | 544,218 | 528,336 | ||||||
Other long-term liabilities | 511,355 | 359,489 | ||||||
Total liabilities | 4,402,821 | 4,420,366 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 2,654 | 2,640 | ||||||
Capital in excess of par value | 759,775 | 706,743 | ||||||
Retained earnings | 6,009,968 | 5,653,811 | ||||||
Accumulated other comprehensive loss | (535,826 | ) | (551,088 | ) | ||||
Treasury stock | (1,569,790 | ) | (1,570,184 | ) | ||||
Total stockholders’ equity | 4,666,781 | 4,241,922 | ||||||
Total liabilities and stockholders’ equity | $ | 9,069,602 | $ | 8,662,288 | ||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Capital stock | ||||||||||||||||
Preferred stock, $0.01 par value | $ | — | $ | — | $ | — | $ | — | ||||||||
Common stock, $0.01 par value | ||||||||||||||||
Balance at the beginning of the period | 2,647 | 2,634 | 2,640 | 2,631 | ||||||||||||
Shares issued | 7 | 3 | 14 | 6 | ||||||||||||
Balance at the end of the period | 2,654 | 2,637 | 2,654 | 2,637 | ||||||||||||
Capital in excess of par value | ||||||||||||||||
Balance at the beginning of the period | 738,173 | 673,516 | 706,743 | 660,894 | ||||||||||||
Issuance of common stock under employee stock plans | 13,277 | (37 | ) | 37,586 | 7,014 | |||||||||||
Share-based compensation costs | 8,325 | 7,384 | 15,446 | 12,955 | ||||||||||||
Balance at the end of the period | 759,775 | 680.863 | 759,775 | 680,863 | ||||||||||||
Retained earnings | ||||||||||||||||
Balance at the beginning of the period | 5,826,313 | 5,153,722 | 5,653,811 | 5,002,419 | ||||||||||||
Net income | 215,503 | 193,860 | 419,771 | 375,200 | ||||||||||||
Cash dividends paid | (31,849 | ) | (32,351 | ) | (63,615 | ) | (64,653 | ) | ||||||||
Other | 1 | 1 | 1 | 2,266 | ||||||||||||
Balance at the end of the period | 6,009,968 | 5,315,232 | 6,009,968 | 5,315,232 | ||||||||||||
Accumulated other comprehensive (loss) income | ||||||||||||||||
Foreign currency translation: | ||||||||||||||||
Balance at the beginning of the period | (294,082 | ) | (239,620 | ) | (302,138 | ) | (251,909 | ) | ||||||||
Translation adjustments | (2,789 | ) | (70,213 | ) | 6,175 | (40,532 | ) | |||||||||
Change in long-term intercompany notes | 3,396 | (14,706 | ) | (1,020 | ) | (9,302 | ) | |||||||||
Net investment hedge instruments gain (loss), net of tax of ($220) and ($13,967) for the quarter ended June 30, 2019 and 2018 and ($1,350) and ($6,625) for the six months ended June 30, 2019 and 2018, respectively | 685 | 43,364 | 4,193 | 20,568 | ||||||||||||
Balance at the end of the period | (292,790 | ) | (281,175 | ) | (292,790 | ) | (281,175 | ) | ||||||||
Defined benefit pension plans: | ||||||||||||||||
Balance at the beginning of the period | (245,993 | ) | (175,138 | ) | (248,950 | ) | (177,371 | ) | ||||||||
Amortization of net actuarial loss (gain) and other, net of tax of ($873) and ($719) for the quarter ended June 30, 2019 and 2018, and ($1,746) and ($1,438) for the six months ended June 30, 2019 and 2018, respectively | 2,957 | 2,233 | 5,914 | 4,466 | ||||||||||||
Balance at the end of the period | (243,036 | ) | (172,905 | ) | (243,036 | ) | (172,905 | ) | ||||||||
Unrealized holding gain (loss) on available-for-sale securities: | ||||||||||||||||
Balance at the beginning of the period | — | — | — | 104 | ||||||||||||
Increase (decrease) during the year, net of tax | — | — | — | (104 | ) | |||||||||||
Balance at the end of the period | — | — | — | — | ||||||||||||
Accumulated other comprehensive loss at the end of the period | (535,826 | ) | (454,080 | ) | (535,826 | ) | (454,080 | ) | ||||||||
Treasury stock | ||||||||||||||||
Balance at the beginning of the period | (1,570,437 | ) | (1,210,717 | ) | (1,570,184 | ) | (1,209,135 | ) | ||||||||
Issuance of common stock under employee stock plans | 6,832 | 8,050 | 6,716 | 6,586 | ||||||||||||
Purchase of treasury stock | (6,185 | ) | (3,889 | ) | (6,322 | ) | (4,007 | ) | ||||||||
Balance at the end of the period | (1,569,790 | ) | (1,206,556 | ) | (1,569,790 | ) | (1,206,556 | ) | ||||||||
Total stockholders’ equity | $ | 4,666,781 | $ | 4,338,096 | $ | 4,666,781 | $ | 4,338,096 | ||||||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2018 | 2017 | |||||||
Cash provided by (used for): | ||||||||
Operating activities: | ||||||||
Net income | $ | 566,413 | $ | 442,938 | ||||
Adjustments to reconcile net income to total operating activities: | ||||||||
Depreciation and amortization | 145,907 | 131,005 | ||||||
Deferred income taxes | (5,574 | ) | 20,492 | |||||
Share-based compensation expense | 20,100 | 19,689 | ||||||
Gain on sale of facilities | — | (1,133 | ) | |||||
Net change in assets and liabilities, net of acquisitions | (89,877 | ) | 19,221 | |||||
Pension contributions | (2,194 | ) | (52,493 | ) | ||||
Other, net | (5,420 | ) | 675 | |||||
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Total operating activities | 629,355 | 580,394 | ||||||
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Investing activities: | ||||||||
Additions to property, plant and equipment | (47,488 | ) | (45,630 | ) | ||||
Purchases of businesses, net of cash acquired | (376,248 | ) | (518,634 | ) | ||||
Proceeds from sale of facilities | 717 | 2,239 | ||||||
Other, net | (1,234 | ) | (400 | ) | ||||
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Total investing activities | (424,253 | ) | (562,425 | ) | ||||
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Financing activities: | ||||||||
Net change in short-term borrowings | 921 | (9,601 | ) | |||||
Repayments of long-term borrowings | (240,000 | ) | — | |||||
Repurchases of common stock | (4,034 | ) | (6,730 | ) | ||||
Cash dividends paid | (97,027 | ) | (62,003 | ) | ||||
Proceeds from stock option exercises | 28,661 | 35,345 | ||||||
Other, net | (5,749 | ) | — | |||||
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Total financing activities | (317,228 | ) | (42,989 | ) | ||||
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Effect of exchange rate changes on cash and cash equivalents | (15,453 | ) | 44,176 | |||||
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(Decrease) increase in cash and cash equivalents | (127,579 | ) | 19,156 | |||||
Cash and cash equivalents: | ||||||||
Beginning of period | 646,300 | 717,259 | ||||||
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End of period | $ | 518,721 | $ | 736,415 | ||||
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Six Months Ended | ||||||||
June 30, | ||||||||
2019 | 2018 | |||||||
Cash provided by (used for): | ||||||||
Operating activities: | ||||||||
Net income | $ | 419,771 | $ | 375,200 | ||||
Adjustments to reconcile net income to total operating activities: | ||||||||
Depreciation and amortization | 114,673 | 97,777 | ||||||
Deferred income taxes | 7,347 | (5,734 | ) | |||||
Share-based compensation expense | 15,446 | 12,955 | ||||||
Gain on sale of facilities | (735 | ) | — | |||||
Net change in assets and liabilities, net of acquisitions | (110,690 | ) | (99,526 | ) | ||||
Pension contributions | (1,534 | ) | (1,404 | ) | ||||
Other, net | (1,700 | ) | 1,274 | |||||
Total operating activities | 442,578 | 380,542 | ||||||
Investing activities: | ||||||||
Additions to property, plant and equipment | (43,278 | ) | (28,565 | ) | ||||
Purchases of businesses, net of cash acquired | — | (374,644 | ) | |||||
Other, net | 3,667 | 1,481 | ||||||
Total investing activities | (39,611 | ) | (401,728 | ) | ||||
Financing activities: | ||||||||
Net change in short-term borrowings | (260,802 | ) | (44 | ) | ||||
Proceeds from long-term borrowings | 100,000 | — | ||||||
Repurchases of common stock | (6,322 | ) | (4,007 | ) | ||||
Cash dividends paid | (63,615 | ) | (64,653 | ) | ||||
Proceeds from stock option exercises | 45,830 | 18,264 | ||||||
Other, net | (6,613 | ) | (5,108 | ) | ||||
Total financing activities | (191,522 | ) | (55,548 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 2,492 | (11,873 | ) | |||||
Increase (decrease) in cash and cash equivalents | 213,937 | (88,607 | ) | |||||
Cash and cash equivalents: | ||||||||
Beginning of period | 353,975 | 646,300 | ||||||
End of period | $ | 567,912 | $ | 557,693 | ||||
September
2019
1. Basis of Presentation
1. | Basis of Presentation |
2. Recent Accounting Pronouncements
In May 2014, the FASB issuedASU 2014-09 and modified the standard thereafter within Accounting Standards Codification (“ASC”) Topic 606,Revenue from Contracts with Customers (“ASC 606”). The objective ofASU 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. The Company adoptedASU 2014-09 effective January 1, 2018 using the modified retrospective method. The adoption ofASU 2014-09 did not have a significant impact on the Company’s consolidated results of operations, financial position and cash flows. See Note 3.
this change.
2. | Recent Accounting Pronouncements |
In January 2017, the FASB issued ASUNo. 2017-01,Clarifying the Definition of a Business(“ASU 2017-01”).ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities is a business.ASU 2017-01 requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of assets is not a business.ASU 2017-01 requires that, to be a business, the set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. The Company prospectively adoptedASU 2017-01 effective January 1, 2018 and the adoption
In March 2017,February 2018, the FASB issuedASU 2017-07, which changes how employers that sponsor defined benefit pension and/orNo.
In May 2017, the FASB issuedASU No. 2017-09,Scope of Modification Accounting(“ASU 2017-09”).ASU 2017-09 clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The Company prospectively adoptedASU 2017-09 effective January 1, 2018 and the adoption did not have a significant impact on the Company’s consolidated results of operations, financial position, cash flows and financial statement disclosures.
retained earnings.
3. Revenues
As discussed in Note 2, the
3. | Revenues |
Revenue is derived from sales of products and services. The Company’s products and services are marketed and sold worldwide through two operating groups: EIG and EMG.
EIG manufactures advanced instruments for the process, power and industrial, and aerospace markets. It provides process and analytical instruments for the oil and gas, petrochemical, pharmaceutical, semiconductor, automation, and food and beverage industries. EIG also provides instruments to the laboratory equipment, ultraprecision manufacturing, medical, and test and measurement markets. It makes power quality monitoring and metering devices, uninterruptible power supplies, programmable power equipment, electromagnetic compatibility test equipment and gas turbines sensors. EIG also provides dashboard instruments for heavy trucks and other vehicles, as well as instrumentation and controls for the food and beverage industries. It supplies the aerospace industry with aircraft and engine sensors, monitoring systems, power supplies, fuel and fluid measurement systems, and data acquisition systems.
EMG is a differentiated supplier of automation solutions, thermal management systems, specialty metals and electrical interconnects. It manufactures highly engineered electrical connectors and electronic packaging used to protect sensitive electronic devices. EMG also makes precision motion control products for data storage, medical devices, business equipment, automation and other applications. It supplies high-purity powdered metals, strip and foil, specialty clad metals and metal matrix composites. EMG also manufactures motors used in commercial appliances, fitness equipment, food and beverage machines, hydraulic pumps and industrial blowers. It produces motor-blower systems and heat exchangers used in thermal management and other applications on a variety of military and commercial aircraft and military ground vehicles. EMG also operates a global network of aviation maintenance, repair and overhaul facilities.
The majority of the Company’s revenues on product sales are recognized at a point in time when the customer obtains control of the product. The transfer in control of the product to the customer is typically evidenced by one or more of the following: the customer having legal title to the product, the Company’s present right to payment, the customer’s physical possession of the product, the customer accepting the product, or the customer has the benefits of ownership or risk of loss. Legal title transfers to the customer in accordance with the delivery terms of the order, usually upon shipment, which is the point that control transfers. For a small percentage of sales where title and risk of loss transfers at the point of delivery, the Company recognizes revenue upon delivery to the customer, which is the point that control transfers, assuming all other criteria for revenue recognition are met.
Under ASC 606, the Company determined that revenues from certain of its customer contracts met the criteria of satisfying its performance obligations over time, primarily in the areas of the manufacture of custom-made equipment and for service repairs of customer-owned equipment. Prior to the adoption of the new standard, these revenues were recorded upon shipment or, in the case of those sales where title and risk of loss passes at the point of delivery, the Company recognized revenue upon delivery to the customer. Recognizing revenue over time for custom-manufactured equipment is based on the Company’s judgment that, in certain contracts, the product does not have an alternative use and the Company has an enforceable right to payment for performance completed to date. This change in revenue recognition accelerated the revenue recognition and costs on the impacted contracts.
Applying the practical expedient available under ASC 606, the Company recognizes incremental cost of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company would have otherwise recognized is one year or less. These costs are included in Selling, general and administrative expenses in the consolidated statement of income.
Revenues associated with repairs of customer-owned assets were previously recorded upon completion and shipment of the repaired equipment to the customer. Under ASC 606, if the Company’s performance enhances an asset that the customer controls as the asset is enhanced, revenue must be recognized over time. The revenue associated with the repair of a customer-owned asset meets this criterion.
The determination of the revenue to be recognized in a given period for performance obligations satisfied over time is based on the input method. The Company recognizes revenue over time as it performs on these contracts because the transfer of control to the customer occurs over time. Revenue is recognized based on the extent of progress towards completion of the performance obligation. The Company generally uses the totalcost-to-cost input method of progress because it best depicts the transfer of control to the customer that occurs as costs are incurred. Under thecost-to-cost method, the extent of progress towards completion is measured based on the proportion of costs incurred to date to the total estimated costs at completion of the performance obligation. On certain contracts, labor hours is used as the measure of progress when it is determined to be a better depiction of the transfer of control to the customer due to the timing and pattern of labor hours incurred.
Performance obligations also include post-delivery service, installation and training. Post-delivery service revenues are recognized over the contract term. Installation and training revenues are recognized over the period the service is provided. Warranty terms in customer contracts can also be considered separate performance obligations if the warranty provides services beyond assurance that a product complies with agreed-upon specification or if a warranty can be purchased separately. The Company does not incur significant obligations for customer returns and refunds.
Payment terms generally begin upon shipment of the product. The Company does have contracts with multiple billing terms that are all due within one year from when the product is delivered. No significant financing component exists. Payment terms are generally30-60 days from the time of shipment or customer acceptance, but terms can be shorter or longer. For customer contracts that have revenue recognized over time, revenue is generally recognized prior to a payment being due from the customer. In such cases, the Company recognizes a contract asset at the time the revenue is recognized. When payment becomes due based on the contract terms, the Company reduces the contract asset and records a receivable. In contracts with billing milestones or in other instances with a long production cycle or concerns about credit, customer advance payments are received. The Company may receive a payment in excess of revenue recognized to that date. In these circumstances, a contract liability is recorded.
Nine Months Ended | ||||||||
September 30, 2018 | ||||||||
Contract Assets | Customer Advanced Payments | |||||||
(In thousands) | ||||||||
Balance at September 30, 2018 | $ | 60,037 | $ | (145,247 | ) | |||
Revenues recognized during the period from: | ||||||||
Amounts in Customer advanced payments | 290,010 | |||||||
Performance obligations satisfied | 183,930 | |||||||
Transferred to Receivables from contract assets at the beginning of the period | (166,391 | ) | ||||||
Increase related to acquired businesses | 9,679 | (840 | ) | |||||
Increase due to cash received | (320,030 | ) |
2019 | 2018 | |||||||
(In thousands) | ||||||||
Contract assets - January 1 | $ | 58,266 | $ | 32,658 | ||||
Contract assets – June 30 | 82,063 | 41,722 | ||||||
Change in contract assets – increase | 23,797 | 9,064 | ||||||
Contract liabilities – January 1 | 146,162 | 117,058 | ||||||
Contract liabilities – June 30 | 151,447 | 142,016 | ||||||
Change in contract liabilities – increase | (5,285 | ) | (24,958 | ) | ||||
Net change | $ | 18,512 | $ | (15,894 | ) | |||
The Company applied
The Company has certain contracts with variable consideration in the form of volume discounts, rebates and early payment options, which may affect the transaction price used as the basis for revenue recognition. In these contracts, the amount of the variable considerationperformance obligation is not considered constrained and is allocated among the variousunsatisfied or partially unsatisfied. These performance obligations in the customer contract based on the relative standalone selling price of each performance obligation will be substantially satisfied within
three years.
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, 2018 | September 30, 2018 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
United States | $ | 358,335 | $ | 237,831 | $ | 596,166 | $ | 1,044,971 | $ | 710,630 | $ | 1,755,601 | ||||||||||||
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| |||||||||||||
International: | ||||||||||||||||||||||||
United Kingdom | 17,646 | 33,364 | 51,010 | 46,974 | 101,913 | 148,887 | ||||||||||||||||||
European Union countries | 93,248 | 97,595 | 190,843 | 281,328 | 303,994 | 585,322 | ||||||||||||||||||
Asia | 193,986 | 51,136 | 245,122 | 576,640 | 157,634 | 734,274 | ||||||||||||||||||
Other foreign countries | 78,826 | 30,995 | 109,821 | 253,012 | 97,448 | 350,460 | ||||||||||||||||||
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|
|
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|
|
|
|
|
| |||||||||||||
Total international | 383,706 | 213,090 | 596,796 | 1,157,954 | 660,989 | 1,818,943 | ||||||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||||
Consolidated net sales | $ | 742,041 | $ | 450,921 | $ | 1,192,962 | $ | 2,202,925 | $ | 1,371,619 | $ | 3,574,544 | ||||||||||||
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|
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
United States | $ | 425,543 | $ | 250,904 | $ | 676,447 | $ | 828,935 | $ | 511,658 | $ | 1,340,593 | ||||||||||||
International (1): | ||||||||||||||||||||||||
United Kingdom | 12,920 | 32,450 | 45,370 | 28,347 | 66,338 | 94,685 | ||||||||||||||||||
European Union countries | 100,835 | 103,362 | 204,198 | 203,620 | 209,781 | 413,401 | ||||||||||||||||||
Asia | 185,287 | 48,577 | 233,863 | 379,134 | 95,688 | 474,821 | ||||||||||||||||||
Other foreign countries | 95,662 | 33,872 | 129,534 | 187,122 | 66,480 | 253,603 | ||||||||||||||||||
Total international | 394,704 | 218,261 | 612,965 | 798,223 | 438,287 | 1,236,510 | ||||||||||||||||||
Consolidated net sales | $ | 820,247 | $ | 469,165 | $ | 1,289,412 | $ | 1,627,158 | $ | 949,945 | $ | 2,577,103 | ||||||||||||
(1) | Includes U.S. export sales of $ 322.1 million and $647.5 million for the three months ended and the six months ended, respectively. |
Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
United States | $ | 357,560 | $ | 241,935 | $ | 599,495 | $ | 686,636 | $ | 472,799 | $ | 1,159,435 | ||||||||||||
International(1): | ||||||||||||||||||||||||
United Kingdom | 15,588 | 33,166 | 48,754 | 29,328 | 68,549 | 97,877 | ||||||||||||||||||
European Union countries | 95,778 | 98,585 | 194,363 | 188,080 | 206,399 | 394,479 | ||||||||||||||||||
Asia | 191,169 | 55,435 | 246,604 | 382,654 | 106,498 | 489,152 | ||||||||||||||||||
Other foreign countries | 84,363 | 35,356 | 119,719 | 174,186 | 66,453 | 240,639 | ||||||||||||||||||
Total international | 386,898 | 222,542 | 609,440 | 774,248 | 447,899 | 1,222,147 | ||||||||||||||||||
Consolidated net sales | $ | 744,458 | $ | 464,477 | $ | 1,208,935 | $ | 1,460,884 | $ | 920,698 | $ | 2,381,582 | ||||||||||||
(1) | Includes U.S. export sales of $ 320.5 million and $635.6 million for the three months ended and the six months ended, respectively. |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, 2018 | September 30, 2018 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Process and analytical instrumentation | $ | 514,513 | $ | — | $ | 514,513 | $ | 1,530,004 | $ | — | $ | 1,530,004 | ||||||||||||
Aerospace and Power | 227,528 | 112,578 | 340,106 | 672,921 | 334,638 | 1,007,559 | ||||||||||||||||||
Electromechanical devices | — | 338,343 | 338,343 | — | 1,036,981 | 1,036,981 | ||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||
Consolidated net sales | $ | 742,041 | $ | 450,921 | $ | 1,192,962 | $ | 2,202,925 | $ | 1,371,619 | $ | 3,574,544 | ||||||||||||
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Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Process and analytical instrumentation | $ | 583,938 | $ | — | $ | 583,938 | $ | 1,161,278 | $ | — | $ | 1,161,278 | ||||||||||||
Aerospace and Power | 236,309 | 120,392 | 356,701 | 465,880 | 239,270 | 705,150 | ||||||||||||||||||
Automation and engineered solutions | — | 348,773 | 348,773 | — | 710,675 | 710,675 | ||||||||||||||||||
Consolidated net sales | $ | 820,247 | $ | 469,165 | $ | 1,289,412 | $ | 1,627,158 | $ | 949,945 | $ | 2,577,103 | ||||||||||||
Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Process and analytical instrumentation | $ | 515,854 | $ | — | $ | 515,854 | $ | 1,015,491 | $ | — | $ | 1,015,491 | ||||||||||||
Aerospace and Power | 228,604 | 113,403 | 342,007 | 445,393 | 222,060 | 667,453 | ||||||||||||||||||
Automation and engineered solutions | — | 351,074 | 351,074 | — | 698,638 | 698,638 | ||||||||||||||||||
Consolidated net sales | $ | 744,458 | $ | 464,477 | $ | 1,208,935 | $ | 1,460,884 | $ | 920,698 | $ | 2,381,582 | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, 2018 | September 30, 2018 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Products transferred at a point in time | $ | 620,221 | $ | 414,666 | $ | 1,034,887 | $ | 1,848,828 | $ | 1,281,378 | $ | 3,130,206 | ||||||||||||
Products and services transferred over time | 121,820 | 36,255 | 158,075 | 354,097 | 90,241 | 444,338 | ||||||||||||||||||
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|
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|
|
|
|
| |||||||||||||
Consolidated net sales | $ | 742,041 | $ | 450,921 | $ | 1,192,962 | $ | 2,202,925 | $ | 1,371,619 | $ | 3,574,544 | ||||||||||||
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Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Products transferred at a point in time | $ | 654,155 | $ | 434,175 | $ | 1,088,330 | $ | 1,331,988 | $ | 869,780 | $ | 2,201,768 | ||||||||||||
Products and services transferred over time | 166,092 | 34,990 | 201,082 | 295,170 | 80,165 | 375,335 | ||||||||||||||||||
Consolidated net sales | $ | 820,247 | $ | 469,165 | $ | 1,289,412 | $ | 1,627,158 | $ | 949,945 | $ | 2,577,103 | ||||||||||||
Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | |||||||||||||||||||||||
EIG | EMG | Total | EIG | EMG | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Products transferred at a point in time | $ | 603,185 | $ | 437,630 | $ | 1,040,815 | $ | 1,228,607 | $ | 866,712 | $ | 2,095,319 | ||||||||||||
Products and services transferred over time | 141,273 | 26,847 | 168,120 | 232,277 | 53,986 | 286,263 | ||||||||||||||||||
Consolidated net sales | $ | 744,458 | $ | 464,477 | $ | 1,208,935 | $ | 1,460,884 | $ | 920,698 | $ | 2,381,582 | ||||||||||||
Reportable Segments
The Company’s operating segments are identified based on the existence of segment managers. Certain of the Company’s operating segments have been aggregated for segment reporting purposes primarily on the basis of product type, production processes, distribution methods and similarity of economic characteristics.
At September 30, 2018, there were no significant changes in identifiable assets of reportable segments from the amounts disclosed at December 31, 2017, other than those described in the acquisitions footnote (Note 9), nor were there any significant changes in the basis of segmentation or in the measurement of segment operating results. Operating information relating to the Company’s reportable segments for the three and nine months ended September 30, 2018 and 2017 can be found in the table included in Part I, Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report onForm 10-Q.
Nine Months Ended | ||||||||
September 30, | ||||||||
2018 | 2017 | |||||||
(In thousands) | ||||||||
Balance at the beginning of the period | $ | 22,872 | $ | 22,007 | ||||
Accruals for warranties issued during the period | 8,166 | 12,235 | ||||||
Settlements made during the period | (9,477 | ) | (13,690 | ) | ||||
Warranty accruals related to acquired businesses and other during the period | 1,261 | 2,372 | ||||||
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| |||||
Balance at the end of the period | $ | 22,822 | $ | 22,924 | ||||
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4. Earnings Per Share
Six Months Ended June 30, | ||||||||
2019 | 2018 | |||||||
(In thousands) | ||||||||
Balance at the beginning of the period | $ | 23,482 | $ | 22,872 | ||||
Accruals for warranties issued during the period | 8,196 | 5,904 | ||||||
Settlements made during the period | (9,275 | ) | (7,068 | ) | ||||
Warranty accruals related to acquired businesses and other during the period | (89 | ) | 796 | |||||
Balance at the end of the period | $ | 22,314 | $ | 22,504 | ||||
4. | Earnings Per Share |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(In thousands) | ||||||||||||||||
Weighted average shares: | ||||||||||||||||
Basic shares | 231,502 | 230,439 | 231,227 | 230,049 | ||||||||||||
Equity-based compensation plans | 1,748 | 1,814 | 1,944 | 1,566 | ||||||||||||
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| |||||||||
Diluted shares | 233,250 | 232,253 | 233,171 | 231,615 | ||||||||||||
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands) | ||||||||||||||||
Weighted average shares: | ||||||||||||||||
Basic shares | 227,577 | 231,252 | 227,219 | 231,090 | ||||||||||||
Equity-based compensation plans | 1,751 | 2,045 | 1,788 | 2,041 | ||||||||||||
Diluted shares | 229,328 | 233,297 | 229,007 | 233,131 | ||||||||||||
5. Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) consisted of the following:
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
September 30, 2018 | September 30, 2017 | |||||||||||||||||||||||
Foreign Currency Items and Other | Defined Benefit Pension Plans | Total | Foreign Currency Items and Other | Defined Benefit Pension Plans | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Balance at the beginning of the period | $ | (281,175 | ) | $ | (172,905 | ) | $ | (454,080 | ) | $ | (294,922 | ) | $ | (199,376 | ) | $ | (494,298 | ) | ||||||
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Other comprehensive income (loss) before reclassifications: | ||||||||||||||||||||||||
Translation adjustments | (7,771 | ) | — | (7,771 | ) | 37,642 | — | 37,642 | ||||||||||||||||
Change in long-term intercompany notes | (1,707 | ) | — | (1,707 | ) | 12,035 | — | 12,035 | ||||||||||||||||
Net investment hedge instruments | 6,770 | — | 6,770 | (32,422 | ) | — | (32,422 | ) | ||||||||||||||||
Gross amounts reclassified from accumulated other comprehensive income (loss) | — | 2,952 | 2,952 | — | 3,512 | 3,512 | ||||||||||||||||||
Income tax benefit (expense) | (1,649 | ) | (719 | ) | (2,368 | ) | 12,190 | (1,321 | ) | 10,869 | ||||||||||||||
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| |||||||||||||
Other comprehensive income (loss), net of tax | (4,357 | ) | 2,233 | (2,124 | ) | 29,445 | 2,191 | 31,636 | ||||||||||||||||
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| |||||||||||||
Balance at the end of the period | $ | (285,532 | ) | $ | (170,672 | ) | $ | (456,204 | ) | $ | (265,477 | ) | $ | (197,185 | ) | $ | (462,662 | ) | ||||||
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Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, 2018 | September 30, 2017 | |||||||||||||||||||||||
Foreign Currency Items and Other | Defined Benefit Pension Plans | Total | Foreign Currency Items and Other | Defined Benefit Pension Plans | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Balance at the beginning of the period | $ | (251,805 | ) | $ | (177,371 | ) | $ | (429,176 | ) | $ | (338,631 | ) | $ | (203,758 | ) | $ | (542,389 | ) | ||||||
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| |||||||||||||
Other comprehensive income (loss) before reclassifications: | ||||||||||||||||||||||||
Translation adjustments | (48,407 | ) | — | (48,407 | ) | 101,846 | — | 101,846 | ||||||||||||||||
Change in long-term intercompany notes | (11,009 | ) | — | (11,009 | ) | 30,727 | — | 30,727 | ||||||||||||||||
Net investment hedge instruments | 33,963 | — | 33,963 | (95,311 | ) | — | (95,311 | ) | ||||||||||||||||
Gross amounts reclassified from accumulated other comprehensive income (loss) | — | 8,856 | 8,856 | — | 10,536 | 10,536 | ||||||||||||||||||
Income tax benefit (expense) | (8,274 | ) | (2,157 | ) | (10,431 | ) | 35,892 | (3,963 | ) | 31,929 | ||||||||||||||
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| |||||||||||||
Other comprehensive income (loss), net of tax | (33,727 | ) | 6,699 | (27,028 | ) | 73,154 | 6,573 | 79,727 | ||||||||||||||||
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| |||||||||||||
Balance at the end of the period | $ | (285,532 | ) | $ | (170,672 | ) | $ | (456,204 | ) | $ | (265,477 | ) | $ | (197,185 | ) | $ | (462,662 | ) | ||||||
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Reclassifications for the amortization of defined benefit pension plans are included in Other expense, net in the consolidated statement of income. See Note 14 for further details.
6. Fair Value Measurements
5. | Fair Value Measurements |
September 30, 2018 | December 31, 2017 | |||||||
Fair Value | Fair Value | |||||||
(In thousands) | ||||||||
Fixed-income investments | $ | 7,880 | $ | 8,060 |
2018:
June 30, 2019 | December 31, 2018 | |||||||
Fair Value | Fair Value | |||||||
(In thousands) | ||||||||
Fixed-income investments | $ | 8,137 | $ | 7,655 |
2018.
September 30, 2018 | December 31, 2017 | |||||||||||||||
Recorded Amount | Fair Value | Recorded Amount | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Long-term debt, net (including current portion) | $(1,901,269) | $ | (1,879,074 | ) | $ | (2,174,289 | ) | $ | (2,210,466 | ) |
2018:
June 30, 2019 | December 31, 2018 | |||||||||||||||
Recorded Amount | Fair Value | Recorded Amount | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Long-term debt, net (including current portion) | $ | (2,473,695 | ) | $ | (2,611,123 | ) | $ | (2,378,809 | ) | $ | (2,368,676 | ) |
7. Hedging Activities
6. | Hedging Activities |
8. Inventories, net
September 30, | December 31, | |||||||
2018 | 2017 | |||||||
(In thousands) | ||||||||
Finished goods and parts | $ | 93,226 | $ | 84,789 | ||||
Work in process | 133,316 | 107,362 | ||||||
Raw materials and purchased parts | 393,607 | 348,353 | ||||||
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| |||||
Total inventories, net | $ | 620,149 | $ | 540,504 | ||||
|
|
|
|
9. Acquisitions
2019.
7. | Inventories, net |
June 30, 2019 | December 31, 2018 | |||||||
(In thousands) | ||||||||
Finished goods and parts | $ | 109,626 | $ | 107,289 | ||||
Work in process | 118,327 | 117,899 | ||||||
Raw materials and purchased parts | 406,185 | 399,556 | ||||||
Total inventories, net | $ | 634,138 | $ | 624,744 | ||||
8. | Leases |
The following table represents the preliminary allocation of the purchase price for the net assets of the 2018 acquisitions based on their estimated fair values at acquisition (in millions):
Property, plant and equipment | $ | 15.2 | ||
Goodwill | 172.2 | |||
Other intangible assets | 182.9 | |||
Long-term liabilities | (0.9 | ) | ||
Deferred income taxes | (38.4 | ) | ||
Net working capital and other(1) | 45.2 | |||
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| |||
Total cash paid | $ | 376.2 | ||
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|
The amount allocatedarrangement conveys to goodwill is reflective of the benefits the Company expectsthe right to realize fromcontrol the 2018 acquisitions as follows: FMH’s products and solutions further broaden the Company’s differentiated product offerings in the aerospace and defense markets. SoundCom expands Rauland’s presence in the healthcare and education markets in the Midwest while providing customers with expanded value-added solutions and services. Motec’s vision systems complement the Company’s existing instrumentation businesses by expanding its portfoliouse of solutions to its customers. The Company expects approximately $75 million of the goodwill recorded relating to the 2018 acquisitions will be tax deductible in future years.
At September 30, 2018, the purchase price allocated to other intangible assets of $182.9 million consists of $31.9 million of indefinite-lived intangible trade names, which are not subject to amortization. The remaining $151.0 million of other intangible assets consists of $116.5 million of customer relationships, which are being amortized overan explicitly or implicitly identified fixed asset for a period of 18time in exchange for consideration. Control of an underlying asset is conveyed to 20 years,the Company if the Company obtains the rights to direct the use of and $34.5 millionto obtain substantially all of purchased technology,the economic benefits from using the underlying asset. The Company has lease agreements which include lease and
the Company having significant economic incentive for extending the lease.
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||||
(In thousands) | (In thousands) | |||||||
Operating lease cost | $ | 10,038 | $ | 18,709 | ||||
Variable lease cost | 899 | 2,530 | ||||||
Total lease cost | $ | 10,937 | $ | 21,239 | ||||
June 30, 2019 | ||||
(In thousands) | ||||
Right of use assets, net | $ | 182,902 | ||
Lease liabilities included in Accrued liabilities and other | 41,751 | |||
Lease liabilities included in Other long-term liabilities | 147,344 | |||
Total lease liabilities | $ | 189,095 | ||
Six Months Ended June 30, 2019 | ||||
(In thousands) | ||||
Cash used in operations for operating leases | $ | 10,937 | ||
Right-of-use assets obtained in exchange for new operating liabilities | $ | 8,634 | ||
Weighted-average remaining lease terms - operating leases (years) | 6.06 | |||
Weighted-average discount rate - operating leases | 3.80 | % |
Lease Liability Maturity Analysis | Operating Leases | |||
(In thousands) | ||||
Remaining 2019 | $ | 24,825 | ||
2020 | 44,598 | |||
2021 | 37,063 | |||
2022 | 29,621 | |||
2023 | 23,893 | |||
Thereafter | 52,579 | |||
Total lease payments | 212,579 | |||
Less: imputed interest | 23,484 | |||
$ | 189,095 | |||
9. | Goodwill |
EIG | EMG | Total | ||||||||||
(In millions) | ||||||||||||
Balance at December 31, 2018 | $ | 2,452.0 | $ | 1,160.0 | $ | 3,612.0 | ||||||
Goodwill acquired | — | — | — | |||||||||
Purchase price allocation adjustments and other | 1.8 | (0.3 | ) | 1.5 | ||||||||
Foreign currency translation adjustments | 1.3 | (1.6 | ) | (0.3 | ) | |||||||
Balance at June 30, 2019 | $ | 2,455.1 | $ | 1,158.1 | $ | 3,613.2 | ||||||
The 2018 acquisitions had an immaterial impact on reported net sales, net income and diluted earnings per share for the three and nine months ended September 30, 2018. Had the 2018 acquisitions been made at the beginning of 2018 or 2017, unaudited pro forma net sales, net income and diluted earnings per share for the three and nine months ended September 30, 2018 and 2017, respectively, would not have been materially different than the amounts reported.
In February 2017, the Company acquired Rauland. The Rauland acquisition included a potential $30 million contingent payment due upon Rauland achieving a certain cumulative revenue target over the period October 1, 2016 to September 30, 2018. At the acquisition date, the estimated fair value of the contingent payment liability was $25.5 million, which was based on a probabilistic approach using level 3 inputs. At September 30, 2018, Rauland achieved the target.
10. | Income Taxes |
Acquisitions Subsequent to September 30, 2018
In October 2018, the Company acquired Telular Corporation and Forza Silicon Corporation (“Forza”) for approximately $565 million in cash. Telular has annual sales of approximately $165 million. Telular is a leading provider of communication solutions for logistics management, tank monitoring and security applications. Forza has annual sales of approximately $20 million. Forza is a leader in the design and production of high-performance imaging sensors used in medical, defense and industrial applications. Telular and Forza will join EIG.
10. Goodwill
The changes in the carrying amounts of goodwill by segment were as follows:
EIG | EMG | Total | ||||||||||
(In millions) | ||||||||||||
Balance at December 31, 2017 | $ | 2,077.0 | $ | 1,038.6 | $ | 3,115.6 | ||||||
Goodwill acquired | 62.4 | 109.8 | 172.2 | |||||||||
Purchase price allocation adjustments and other | (1.6 | ) | — | (1.6 | ) | |||||||
Foreign currency translation adjustments | (11.0 | ) | (11.5 | ) | (22.5 | ) | ||||||
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|
|
| |||||||
Balance at September 30, 2018 | $ | 2,126.8 | $ | 1,136.9 | $ | 3,263.7 | ||||||
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|
|
|
|
11. Income Taxes
At September 30, 2018,2019, the Company had gross unrecognized tax benefits of $70.9$128.6 million, of which $57.0$79.2 million, if recognized, would impact the effective tax rate.
Balance at December 31, 2017 | $ | 60.3 | ||
Additions for tax positions | 26.7 | |||
Reductions for tax positions | (16.1 | ) | ||
|
| |||
Balance at September 30, 2018 | $ | 70.9 | ||
|
|
Additions for tax positions were primarily driven by a change in measurement of a prior year tax position stemming from the planned implementation of prospective tax planning. Reductions for tax positions were primarily driven by the final closure of the 2014 tax year with no examination. See effective tax rate discussion below for further details.
Balance at December 31, 2018 | $ | 119.3 | ||
Additions for tax positions | 9.3 | |||
Reductions for tax positions | — | |||
Balance at June 30, 2019 | $ | 128.6 | ||
carryforward interest deductions.
11. | Debt |
Although the $91.6 million net benefit represents what the Company believes is a reasonable estimate of the impact of the income tax effects of the Tax Act on the Company’s consolidated financial statements as of December 31, 2017, it should be considered provisional. As of September 30, 2018, the Company has not materially changed its estimate of the December 31, 2017 impact of the income tax effects of the Tax Act. As additional guidance from the U.S. Department of Treasury is provided, the Company may need to adjust the provisional amounts after it finalizes the 2017 U.S. tax return and is able to conclude whether any further adjustments are required to its U.S. portion of net deferred tax liability of $390.4 million as of December 31, 2017, as well as to the liability associated with theone-time mandatory tax. The currently recorded amounts includecompleted a variety of estimates of taxable earnings and profits, estimated taxable foreign cash balances, differences between U.S. GAAP and U.S. tax principles and interpretations of many aspects of the Tax Act that may, if changed, impact the final amounts. Any adjustments to these provisional amounts will be reported as a component of Provision for income taxes in the reporting period in which any such adjustments are determined, which will be no later than the fourth quarter of 2018. As of September 30, 2018, the Company is still evaluating the potential future impact of GILTI and has not provided any provisional deferred tax liability for it. Under U.S. GAAP, the Company is permitted to make an accounting policy election to either treat taxes due on future inclusions in the U.S. taxable income related to GILTI as a current period expense when incurred or to factor such amounts into the Company’s measurement of its deferred taxes. Due to the ongoing evaluation, the Company has not yet made the accounting policy decision as of September 30, 2018.
12. Debt
In the third quarter of 2018, the Company paid in full, at maturity, $80 million in aggregate principal amount of 6.35% private placement agreement to sell $575 million and 75 million Euros in senior notes to a group of institutional investors (the “2018 Private Placement”). There were two funding dates under the 2018 Private Placement. The first funding occurred in December 2018 for $475 million and $16075 million in aggregate principal amount of 7.08% private placement senior notes.
In October 2018, the Company along with certain of its foreign subsidiaries amended and restated its credit agreement dated as of September 22, 2011, as amended and restated as of March 10, 2016 (the “Credit Agreement”)Euros ($85.1 million). The Credit Agreement amendssecond funding occurred in January 2019 for $100 million. The 2018 Private Placement senior notes carry a weighted average interest rate of 3.93% and restates the Company’s existing $850 million revolving credit facility, which was dueare subject to expire in March 2021. The Credit Agreement consists of a five-year revolving credit facility in an aggregate principal amount of $1.5 billion with a final maturity date in October 2023. The revolving credit facility total borrowing capacity excludes an accordion featurecertain customary covenants, including financial covenants that, permitsamong other things, require the Company to request upmaintain certain
12. | Share-Based Compensation |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(In thousands) | ||||||||||||||||
Stock option expense | $ | 2,924 | $ | 2,482 | $ | 8,467 | $ | 7,449 | ||||||||
Restricted stock expense | 3,738 | 3,094 | 10,586 | 12,240 | ||||||||||||
PRSU expense | 483 | — | 1,047 | — | ||||||||||||
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|
|
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| |||||||||
Totalpre-tax expense | $ | 7,145 | $ | 5,576 | $ | 20,100 | $ | 19,689 | ||||||||
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|
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands) | ||||||||||||||||
Stock option expense | $ | 3,608 | $ | 3,115 | $ | 6,380 | $ | 5,543 | ||||||||
Restricted stock expense | 3,399 | 3,772 | 7,117 | 6,848 | ||||||||||||
PRSU expense | 1,318 | 497 | 1,949 | 564 | ||||||||||||
Total pre-tax expense | $ | 8,325 | $ | 7,384 | $ | 15,446 | $ | 12,955 | ||||||||
Nine Months Ended | Year Ended | |||||||
September 30, 2018 | December 31, 2017 | |||||||
Expected volatility | 17.3 | % | 18.0 | % | ||||
Expected term (years) | 5.0 | 5.0 | ||||||
Risk-free interest rate | 2.81 | % | 1.94 | % | ||||
Expected dividend yield | 0.76 | % | 0.60 | % | ||||
Black-Scholes-Merton fair value per stock option granted | $ | 14.12 | $ | 11.05 |
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | |||||||
Expected volatility | 19.1 | % | 17.3 | % | ||||
Expected term (years) | 5.0 | 5.0 | ||||||
Risk-free interest rate | 2.25 | % | 2.81 | % | ||||
Expected dividend yield | 0.66 | % | 0.76 | % | ||||
Black-Scholes-Merton fair value per stock option granted | $ | 16.85 | $ | 14.12 |
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
(In thousands) | (Years) | (In millions) | ||||||||||||||
Outstanding at December 31, 2017 | 5,583 | $ | 48.99 | |||||||||||||
Granted | 885 | 73.45 | ||||||||||||||
Exercised | (665 | ) | 42.21 | |||||||||||||
Forfeited | (119 | ) | 56.17 | |||||||||||||
|
| |||||||||||||||
Outstanding at September 30, 2018 | 5,684 | $ | 53.44 | 4.5 | $ | 146.0 | ||||||||||
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| |||||||||
Exercisable at September 30, 2018 | 3,168 | $ | 47.17 | 2.9 | $ | 101.2 | ||||||||||
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|
|
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
(In thousands) | (Years) | (In millions) | ||||||||||||||
Outstanding at December 31, 2018 | 5,629 | $ | 53.46 | |||||||||||||
Granted | 826 | 85.43 | ||||||||||||||
Exercised | (1,100 | ) | 41.90 | |||||||||||||
Forfeited | (143 | ) | 64.77 | |||||||||||||
Outstanding at June 30, 2019 | 5,212 | $ | 60.65 | 5.2 | $ | 157.3 | ||||||||||
Exercisable at June 30, 2019 | 3,064 | $ | 53.08 | 3.5 | $ | 115.7 | ||||||||||
Shares | Weighted Average Grant Date Fair Value | |||||||
(In thousands) | ||||||||
Nonvested restricted stock outstanding at December 31, 2017 | 932 | $ | 53.53 | |||||
Granted | 232 | 73.64 | ||||||
Vested | (214 | ) | 52.75 | |||||
Forfeited | (49 | ) | 55.05 | |||||
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| |||||||
Nonvested restricted stock outstanding at September 30, 2018 | 901 | $ | 58.86 | |||||
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|
Shares | Weighted Average Grant Date Fair Value | |||||||
(In thousands) | ||||||||
Nonvested restricted stock outstanding at December 31, 2018 | 891 | $ | 58.98 | |||||
Granted | 199 | 85.22 | ||||||
Vested | (268 | ) | 58.04 | |||||
Forfeited | (57 | ) | 63.26 | |||||
Nonvested restricted stock outstanding at June 30, 2019 | 765 | $ | 65.80 | |||||
14. Retirement and Pension Plans
years
13. | Retirement and Pension Plans |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(In thousands) | ||||||||||||||||
Defined benefit plans: | ||||||||||||||||
Service cost | $ | 1,766 | $ | 1,919 | $ | 5,373 | $ | 5,657 | ||||||||
Interest cost | 6,311 | 6,904 | 19,214 | 20,566 | ||||||||||||
Expected return on plan assets | (14,734 | ) | (13,343 | ) | (44,581 | ) | (39,884 | ) | ||||||||
Amortization of net actuarial loss and other | 2,952 | 3,512 | 8,856 | 10,536 | ||||||||||||
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| |||||||||
Pension income | (3,705 | ) | (1,008 | ) | (11,138 | ) | (3,125 | ) | ||||||||
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| |||||||||
Other plans: | ||||||||||||||||
Defined contribution plans | 6,877 | 5,830 | 22,220 | 18,788 | ||||||||||||
Foreign plans and other | 1,505 | 1,435 | 4,688 | 4,323 | ||||||||||||
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| |||||||||
Total other plans | 8,382 | 7,265 | 26,908 | 23,111 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Total net pension expense | $ | 4,677 | $ | 6,257 | $ | 15,770 | $ | 19,986 | ||||||||
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|
|
|
|
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands) | ||||||||||||||||
Defined benefit plans: | ||||||||||||||||
Service cost | $ | 1,702 | $ | 1,793 | $ | 3,415 | $ | 3,607 | ||||||||
Interest cost | 6,740 | 6,421 | 13,502 | 12,903 | ||||||||||||
Expected return on plan assets | (13,085 | ) | (14,884 | ) | (26,211 | ) | (29,847 | ) | ||||||||
Amortization of net actuarial loss and other | 4,649 | 2,952 | 7,936 | 5,904 | ||||||||||||
Pension expense (income) | 6 | (3,718 | ) | (1,358 | ) | (7,433 | ) | |||||||||
Other plans: | ||||||||||||||||
Defined contribution plans | 8,154 | 6,944 | 17,262 | 15,343 | ||||||||||||
Foreign plans and other | 1,543 | 1,587 | 3,105 | 3,183 | ||||||||||||
Total other plans | 9,697 | 8,531 | 20,367 | 18,526 | ||||||||||||
Total net pension expense | $ | 9,703 | $ | 4,813 | $ | 19,009 | $ | 11,093 | ||||||||
15. Contingencies
14. | Contingencies |
16. Restructuring Charges
During the fourth quarter
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(In thousands) | ||||||||||||||||
Net sales(1): | ||||||||||||||||
Electronic Instruments | $ | 742,041 | $ | 671,606 | $ | 2,202,925 | $ | 1,949,038 | ||||||||
Electromechanical | 450,921 | 413,193 | 1,371,619 | 1,208,047 | ||||||||||||
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|
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|
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| |||||||||
Consolidated net sales | $ | 1,192,962 | $ | 1,084,799 | $ | 3,574,544 | $ | 3,157,085 | ||||||||
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|
|
|
| |||||||||
Operating income and income before income taxes: | ||||||||||||||||
Segment operating income(2): | ||||||||||||||||
Electronic Instruments | $ | 190,313 | $ | 162,988 | $ | 567,503 | $ | 482,004 | ||||||||
Electromechanical | 92,667 | 83,110 | 277,919 | 246,021 | ||||||||||||
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|
|
|
|
|
| |||||||||
Total segment operating income | 282,980 | 246,098 | 845,422 | 728,025 | ||||||||||||
Corporate administrative expenses(2) | (17,714 | ) | (16,060 | ) | (51,902 | ) | (50,991 | ) | ||||||||
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|
|
|
|
|
|
| |||||||||
Consolidated operating income(2) | 265,266 | 230,038 | 793,520 | 677,034 | ||||||||||||
Interest expense | (19,391 | ) | (24,709 | ) | (61,861 | ) | (73,777 | ) | ||||||||
Other expense, net(2) | (945 | ) | (902 | ) | (2,684 | ) | (4,053 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Consolidated income before income taxes | $ | 244,930 | $ | 204,427 | $ | 728,975 | $ | 599,204 | ||||||||
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands) | ||||||||||||||||
Net sales: | ||||||||||||||||
Electronic Instruments | $ | 820,247 | $ | 744,458 | $ | 1,627,158 | $ | 1,460,884 | ||||||||
Electromechanical | 469,165 | 464,477 | 949,945 | 920,698 | ||||||||||||
Consolidated net sales | $ | 1,289,412 | $ | 1,208,935 | $ | 2,577,103 | $ | 2,381,582 | ||||||||
Operating income and income before income taxes: | ||||||||||||||||
Segment operating income: | ||||||||||||||||
Electronic Instruments | $ | 212,913 | $ | 193,831 | $ | 415,997 | $ | 377,190 | ||||||||
Electromechanical | 101,065 | 94,250 | 199,878 | 185,252 | ||||||||||||
Total segment operating income | 313,978 | 288,081 | 615,875 | 562,442 | ||||||||||||
Corporate administrative expenses | (18,568 | ) | (17,995 | ) | (37,206 | ) | (34,188 | ) | ||||||||
Consolidated operating income | 295,410 | 270,086 | 578,669 | 528,254 | ||||||||||||
Interest expense | (21,475 | ) | (20,784 | ) | (44,128 | ) | (42,470 | ) | ||||||||
Other expense, net | (3,337 | ) | (1,081 | ) | (7,004 | ) | (1,739 | ) | ||||||||
Consolidated income before income taxes | $ | 270,599 | $ | 248,221 | $ | 527,537 | $ | 484,045 | ||||||||
2018thirdsecond quarter of 20182019 compared with the thirdsecond quarter of 2017
translation.
2018.
The effective tax rate for the third quarter of 2018 was 21.9%, compared with 24.9% for the third quarter of 2017. The third quarter of 2018 effective tax rate primarily reflects the impact of the recently enacted Tax Act including the reduction of the U.S. corporate income tax rate and the current impact of GILTI and FDII provisions, as well as a $16.0 million net tax expense for a change in measurement of a prior year uncertain tax position stemming from the planned implementation of prospective tax planning. The third quarter of 2018 and 2017 effective tax rates also reflect the release of uncertain tax position liabilities primarily relating to statute expirations for U.S. Federal and State jurisdictions totaling $11.4 million and $8.1 million, respectively. See Note 11 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report onForm 10-Q.
Net income for the third quarter of 2018 was $191.2 million, an increase of $37.7 million or 24.6%, compared with $153.5 million for the third quarter of 2017.
Diluted earnings per share for the third quarter of 2018 were $0.82, an increase of $0.16 or 24.2%, compared with $0.66 per diluted share for the third quarter of 2017.
Segment Results
EIG’s netsales totaled $742.0 million for the third quarter of 2018, an increase of $70.4 million or 10.5%, compared with $671.6 million for the third quarter of 2017. The net sales increase was due to 7% organic sales growth, and a 4% increase from the 2018 acquisitions of Motec and SoundCom and the 2017 acquisition of Arizona Instrument. Foreign currency translation was essentially flat period over period.
EIG’s operating income was $190.3 million for the third quarter of 2018, an increase of $27.3 million or 16.7%, compared with $163.0 million for the third quarter of 2017. EIG’s operating margins were 25.6% of net sales for the third quarter of 2018, compared with 24.3% of net sales for the third quarter of 2017. The increase in EIG’s operating income and operating margins for the third quarter of 2018 was primarily due to the increase in net sales noted above, as well as the benefits of the Group’s Operational Excellence initiatives.
EMG’s net sales totaled $450.9 million for the third quarter of 2018, an increase of $37.7 million or 9.1%, compared with $413.2 million for the third quarter of 2017. The net sales increase was due to 7% organic sales growth and a 2% increase from the 2018 acquisition of FMH. Foreign currency translation was essentially flat period over period.
EMG’s operating income was $92.7 million for the third quarter of 2018, an increase of $9.6 million or 11.6%, compared with $83.1 million for the third quarter of 2017. EMG’s operating margins were 20.6% of net sales for the third quarter of 2018, compared with 20.1% of net sales for the third quarter of 2017. The increase in EMG’s operating income and operating margins for the third quarter of 2018 was primarily due to the increase in net sales noted above, as well as the benefits of the Group’s Operational Excellence initiatives.
Results of operations for the first nine months of 2018 compared with the first nine months of 2017
Net sales for the first nine months of 2018 were $3,574.5 million, an increase of $417.4 million or 13.2%, compared with net sales of $3,157.1 million for the first nine months of 2017. The increase in net sales for the first nine months of 2018 was due to 8% organic sales growth, a 4% increase from acquisitions and favorable 1% effect of foreign currency translation.
Total international sales for the first nine months of 2018 were $1,818.9 million or 50.9% of net sales, an increase of $203.8 million or 12.6%, compared with international sales of $1,615.1 million or 51.2% of net sales for the first nine months of 2017. The $203.8 million increase in international sales was primarily driven by organic sales growth. Both reportable segments of the Company maintain strong international sales presences in Europe and Asia.
Orders for the first nine months of 2018 were $3,767.7 million, an increase of $388.0 million or 11.5%, compared with $3,379.7 million for the first nine months of 2017. The increase in orders for the first nine months of 2018 was due to 7% organic order growth and a 5% increase from acquisitions. Foreign currency translation was essentially flat period over period. As a result, the Company’s backlog of unfilled orders at September 30, 2018 was $1,589.3 million, an increase of $193.2 million or 13.8%, compared with $1,396.1 million at December 31, 2017.
Segment operating income for the first nine months of 2018 was $845.4 million, an increase of $117.4 million or 16.1%, compared with segment operating income of $728.0 million for the first nine months of 2017. Segment operating income, as a percentage of net sales, increased to 23.7% for the first nine months of 2018, compared with 23.1% for the first nine months of 2017. The increase in segment operating income and segment operating margins for the first nine months of 2018 resulted primarily from the increase in net sales noted above, as well as the benefits of the Company’s Operational Excellence initiatives.
Cost of sales for the first nine months of 2018 was $2,351.0 million or 65.8% of net sales, an increase of $259.3 million or 12.4%, compared with $2,091.7 million or 66.3% of net sales for the first nine months of 2017. Cost of sales increased primarily due to the increase in net sales noted above.
Selling, general and administrative expenses for the first nine months of 2018 were $430.0 million or 12.0% of net sales, an increase of $41.7 million or 10.7%, compared with $388.3 million or 12.3% of net sales for the first nine months of 2017. Selling, general and administrative expenses increased primarily due to the increase in net sales noted above. The nine months ended September 30, 2017 includes a second quarter of 2017 $2.5 millionpre-tax charge in corporate administrative expenses related to the accelerated vesting of restricted stock grants in association with the retirement of the Company’s Executive Chairman of the Board of Directors.
Consolidated operating income was $793.5 million or 22.2% of net sales for the first nine months of 2018, an increase of $116.5 million or 17.2%, compared with $677.0 million or 21.4% of net sales for the first nine months of 2017.
Interest expense was $61.9 million for the first nine months of 2018, a decrease of $11.9 million or 16.1%, compared with $73.8 million for the first nine months of 2017. Interest expense decreased primarily due to the repayment in full, at maturity, of $270 million in aggregate principal amount of 6.20% private placement senior notes in the fourth quarter of 2017, $80 million in aggregate principal amount of 6.35% private placement senior notes in the third quarter of 2018 and $160 million in aggregate principal amount of 7.08% private placement senior notes in the third quarter of 2018.
The effective tax rate for the first nine months of 2018 was 22.3%, compared with 26.1% for the first nine months of 2017. The first nine months of 2018 effective tax rate primarily reflects the impact of the recently enacted Tax Act including the reduction of the U.S. corporate income tax rate and the current impact of GILTI and FDII provisions, as well as a $16.0 million net tax expense for a change in measurement of a prior year uncertain tax position stemming from the planned implementation of prospective tax planning. The third quarter of 2018 and 2017 effective tax rates also reflect the release of uncertain tax position liabilities primarily relating to statute expirations for U.S. Federal and State jurisdictions totaling $11.4 million and $8.1 million, respectively. See Note 11 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report onForm 10-Q.
Net income for the first nine months of 2018 was $566.4 million, an increase of $123.5 million or 27.9%, compared with $442.9 million for the first nine months of 2017.
Diluted earnings per share for the first nine months of 2018 were $2.43, an increase of $0.52 or 27.2%, compared with $1.91 per diluted share for the first nine months of 2017.
Segment Results
EIG’s netsales totaled $2,202.9 million for the first nine months of 2018, an increase of $253.9 million or 13.0%, compared with $1,949.0 million for the first nine months of 2017. The net sales increase was due to 7% organic sales growth, a 5% increase from the 2018 acquisitions of Motec and SoundCom, the 2017 acquisitions of Arizona Instrument, MOCON and Rauland, and favorable 1% effect of foreign currency translation.
EIG’s operating income was $567.5 million for the first nine months of 2018, an increase of $85.5 million or 17.7%, compared with $482.0 million for the first nine months of 2017. EIG’s operating margins were 25.8% of net sales for the first nine months of 2018, compared with 24.7% of net sales for the first nine months of 2017. The increase in EIG’s operating income and operating margins for the first nine months of 2018 was primarily due to the increase in net sales noted above, as well as the benefits of the Group’s Operational Excellence initiatives.
EMG’s net sales totaled $1,371.6 million for the first nine months of 2018, an increase of $163.6 million or 13.5%, compared with $1,208.0 million for the first nine months of 2017. The net sales increase was due to 9% organic sales growth, a 3% increase from the 2018 acquisition of FMH and favorable 2% effect of foreign currency translation.
EMG’s operating income was $277.9 million for the first nine months of 2018, an increase of $31.9 million or 13.0%, compared with $246.0 million for the first nine months of 2017. The increase in EMG’s operating income for the first nine months of 2018 was primarily due to the increase in net sales noted above. EMG’s operating margins were 20.3% of net sales for the first nine months of 2018, compared with 20.4% of net sales for the first nine months of 2017.
Financial Condition
Liquidity and Capital Resources
Cash provided by operating activities totaled $629.4 million for the first nine months of 2018, an increase of $49.0 million or 8.4%, compared with $580.4 million for the first nine months of 2017. The increase in cash provided by operating activities for the first nine months of 2018 was primarily due to higher net income and a $50.3 million decrease in defined benefit pension plan contributions, driven by a discretionary $50.1 million contribution to the Company’s defined benefit pension plans in the first quarter of 2017, partially offset by higher overall operating working capital levels.
Free cash flow (cash flow provided by operating activities less capital expenditures) was $581.9 million for the first nine months of 2018, compared with $534.8 million for the first nine months of 2017. EBITDA (earnings before interest, income taxes, depreciation and amortization) was $935.5 million for the first nine months of 2018, compared with $802.6 million for the first nine months of 2017. Free cash flow and EBITDA are presented because the Company is aware that they are measures used by third parties in evaluating the Company.
Cash used for investing activities totaled $424.3 million for the first nine months of 2018, compared with $562.4 million for the first nine months of 2017. For the first nine months of 2018, the Company paid $376.2 million, net of cash acquired, to acquire Motec in June 2018, SoundCom in April 2018 and FMH in January 2018. For the first nine months of 2017, the Company paid $518.6 million, net of cash acquired, to acquire MOCON in June 2017 and Rauland in February 2017. Additions to property, plant and equipment totaled $47.5 million for the first nine months of 2018, compared with $45.6 million for the first nine months of 2017.
Cash used for financing activities totaled $317.2 million for the first nine months of 2018, compared with $43.0 million for the first nine months of 2017. At September 30, 2018, total debt, net was $1,901.3 million, compared with $2,174.3 million at December 31, 2017. For the first nine months of 2018, the net change in short-term borrowings was not significant, compared with a $9.6 million decrease in short-term borrowings for the first nine months of 2017. In the third quarter of 2018, the Company paid in full, at maturity, $80 million in aggregate principal amount of 6.35% private placement senior notes and $160 million in aggregate principal amount of 7.08% private placement senior notes.notes in the third quarter of 2018, and $65 million in aggregate principal amount of 7.18% private placement senior notes in the fourth quarter of 2018.
option exercises were $45.8 million for the first six months of 2019, compared with $18.3 million for the first six months of 2018.
Subsequent Events
In October 2018, the Company acquired Telular and Forza for approximately $565 million in cash using available cash and borrowings under the Company’s revolving credit facility.
In October 2018, the Company along with certain of its foreign subsidiaries amended and restated its credit agreement dated as of September 22, 2011, as amended and restated as of March 10, 2016 (the “Credit Agreement”). The Credit Agreement amends and restates the Company’s existing $850 million revolving credit facility, which was due to expire in March 2021. The Credit Agreement consists of a five-year revolving credit facility in an aggregate principal amount of $1.5 billion with a final maturity date in October 2023. The revolving credit facility total borrowing capacity excludes an accordion feature that permits the Company to request up to an additional $500 million in revolving credit commitments at any time during the life of the Credit Agreement under certain conditions. Interest rates on outstanding borrowings under the revolving credit facility are at the applicable benchmark rate plus a negotiated spread or at the U.S. prime rate. The revolving credit facility provides the Company with additional financial flexibility to support its growth plans, including its acquisition strategy. At October 31, 2018, the Company had available borrowing capacity of $1.7 billion under its revolving credit facility, including the $500 million accordion feature.
Item 4. | Controls and Procedures |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Period | Total Number of Shares Purchased (1)(2) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan (2) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan | ||||||||||||
July 1, 2018 to July 31, 2018 | 93 | $ | 72.71 | 93 | $ | 364,714,150 | ||||||||||
August 1, 2018 to August 31, 2018 | 276 | 76.19 | 276 | 364,693,122 | ||||||||||||
September 1, 2018 to September 30, 2018 | — | — | — | 364,693,122 | ||||||||||||
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Total | 369 | 75.31 | 369 | |||||||||||||
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Period | Total Number of Shares Purchased (1)(2) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan (2) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan | ||||||||||||
April 1, 2019 to April 30, 2019 | — | $ | — | — | $ | 500,912,305 | ||||||||||
May 1, 2019 to May 31, 2019 | 72,045 | 85.50 | 72,045 | 494,752,129 | ||||||||||||
June 1, 2019 to June 30, 2019 | 283 | 86.48 | 283 | 494,727,655 | ||||||||||||
Total | 72,328 | 85.51 | 72,328 | |||||||||||||
(1) | Represents shares surrendered to the Company to satisfy tax withholding obligations in connection with employees’ share-based compensation awards. |
(2) | Consists of the number of shares purchased pursuant to the Company’s Board of Directors |
Item 6. | Exhibits |
* | Filed electronically herewith. |
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AMETEK, Inc. | ||
(Registrant) | ||
By: | /s/ Thomas M. | |
Thomas M. Montgomery | ||
Senior Vice President – Comptroller | ||
(Principal Accounting Officer) |
November
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