UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _____________________
Commission file number 1-12981
AMETEK, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 14-1682544
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
37 North Valley Road, Building 4, P.O. Box 1764, Paoli, Pennsylvania 19301-0801
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code 610-647-2121
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of the issuer's common stock outstanding as of the
latest practicable date was: Common Stock, $0.01 Par Value, outstanding at
October 31, 2001 was 32,794,842 shares.
AMETEK, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income for
the Three and Nine Months Ended September 30, 2001 and 2000......... 3
Consolidated Balance Sheet as of
September 30, 2001 and December 31, 2000............................ 4
Condensed Consolidated Statement of Cash Flows for
the Nine Months Ended September 30, 2001 and 2000................... 5
Notes to Consolidated Financial Statements .......................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................. 16
SIGNATURES...................................................................... 17
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMETEK, INC.
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(Dollars and shares in thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Net sales $ 256,533 $ 255,098 $ 782,026 $ 766,414
--------- --------- --------- ---------
Expenses:
Cost of sales, excluding depreciation 191,760 189,458 582,632 570,001
Selling, general and administrative 23,745 24,241 71,069 71,541
Depreciation 8,062 7,293 24,082 23,109
--------- --------- --------- ---------
Total expenses 223,567 220,992 677,783 664,651
--------- --------- --------- ---------
Operating income 32,966 34,106 104,243 101,763
Other income (expenses):
Interest expense (6,456) (7,839) (21,274) (21,533)
Other, net 422 249 781 (499)
--------- --------- --------- ---------
Income before income taxes 26,932 26,516 83,750 79,731
Provision for income taxes 9,205 9,198 29,098 28,436
--------- --------- --------- ---------
Net Income $ 17,727 $ 17,318 $ 54,652 $ 51,295
========= ========= ========= =========
Basic earnings per share $ 0.54 $ 0.54 $ 1.66 $ 1.60
========= ========= ========= =========
Diluted earnings per share $ 0.53 $ 0.53 $ 1.63 $ 1.58
========= ========= ========= =========
Average common shares outstanding:
Basic shares 33,063 32,138 32,873 32,074
========= ========= ========= =========
Diluted shares 33,701 32,529 33,512 32,470
========= ========= ========= =========
Dividends per share $ 0.06 $ 0.06 $ 0.18 $ 0.18
========= ========= ========= =========
See accompanying notes.
3
AMETEK, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
September 30, December 31,
2001 2000
------------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 7,943 $ 7,187
Marketable securities 6,431 8,111
Receivables, less allowance for possible losses 204,083 139,568
Inventories 146,454 129,365
Deferred income taxes 10,448 10,516
Other current assets 13,308 8,353
--------- ---------
Total current assets 388,667 303,100
--------- ---------
Property, plant and equipment, at cost 546,489 528,521
Less accumulated depreciation (333,854) (314,566)
--------- ---------
212,635 213,955
--------- ---------
Goodwill, net of accumulated amortization 347,101 299,479
Investments and other assets 48,597 42,454
--------- ---------
Total assets $ 997,000 $ 858,988
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $ 141,334 $ 127,601
Accounts payable 79,703 87,315
Accruals 94,739 82,739
--------- ---------
Total current liabilities 315,776 297,655
Long-term debt 305,856 233,616
Deferred income taxes 36,057 33,166
Other long-term liabilities 12,556 13,713
Stockholders' equity:
Common stock 334 334
Capital in excess of par value 293 2,248
Retained earnings 379,430 330,696
Accumulated other comprehensive losses (35,477) (30,165)
Treasury stock (17,825) (22,275)
--------- ---------
326,755 280,838
--------- ---------
Total liabilities and stockholders' equity $ 997,000 $ 858,988
========= =========
See accompanying notes
4
AMETEK, Inc.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine months ended
September 30,
-----------------------
2001 2000
-------- --------
Cash provided by (used for):
Operating activities:
Net income $ 54,652 $ 51,295
Adjustments to reconcile net income to total operating activities:
Depreciation and amortization 33,298 31,084
Deferred income taxes 3,639 4,402
Net change in assets and liabilities (34,851) (39,243)
Other (8,207) (1,239)
-------- --------
Total operating activities (before sale of accounts receivable) 48,531 46,299
Proceeds from sale of accounts receivable (45,000) 5,000
-------- --------
Total operating activities 3,531 51,299
-------- --------
Investing activities:
Additions to property, plant and equipment (21,376) (17,658)
Purchase of businesses (68,102) (81,017)
Other 5,504 2,105
-------- --------
Total investing activities (83,974) (96,570)
-------- --------
Financing activities:
Net change in short-term borrowings 13,817 45,596
Additional long-term debt 73,321 3,702
Repurchases of common stock (11,628) (1,611)
Cash dividends paid (5,918) (5,763)
Proceeds from stock options and other 11,607 1,653
-------- --------
Total financing activities 81,199 43,577
-------- --------
Increase (decrease) in cash and cash equivalents 756 (1,694)
Cash and cash equivalents:
Beginning of period 7,187 8,636
-------- --------
As of September 30 $ 7,943 $ 6,942
======== ========
See accompanying notes.
5
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1 - FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements as of and for the three
and nine-month periods ended September 30, 2001 and 2000 are unaudited. The
Company believes that all adjustments (which consist of normal recurring
accruals) necessary for a fair presentation of the consolidated financial
statements of the Company for the periods presented have been included.
Quarterly results of operations are not necessarily indicative of results for
the full year. These consolidated financial statements should be read in
conjunction with the audited financial statements and related notes in the
Company's 2000 Annual Report on Form 10-K as filed with the Securities and
Exchange Commission. Presentation of certain amounts appearing in the prior
years' financial statements has been reclassified to conform to the current
year's presentation.
NOTE 2 - EARNINGS PER SHARE
The calculation of basic earnings per share for the three and nine-month
periods ended September 30, 2001 and 2000 are based on the average number of
common shares considered outstanding during the periods. Diluted earnings per
share for such periods reflect the effect of all potentially dilutive securities
(primarily outstanding common stock options). The following table presents the
number of shares used in the calculation of basic earnings per share and diluted
earnings per share for the periods:
Weighted average shares (in thousands) (unaudited)
--------------------------------------------------
Three months ended Sept. 30, Nine months ended Sept. 30,
---------------------------- ---------------------------
2001 2000 2001 2000
------ ------ ------ ------
Basic 33,063 32,138 32,873 32,074
Stock option and award plans 638 391 639 396
------ ------ ------ ------
Diluted 33,701 32,529 33,512 32,470
====== ====== ====== ======
NOTE 3 - ACQUISITIONS
In July, 2001, the Company acquired EDAX, Inc. (EDAX) from Panta
Electronics for $37 million in cash, subject to adjustment. EDAX is a leading
manufacturer of analytic instrumentation, which complements the Company's
process and analytical product lines. EDAX had approximately $34 million in
sales in 2000 and employed 170 employees. The acquired business is now part of
the Company's Electronic Instruments Group.
In May, 2001, the Company acquired the assets of GS Electric from SPX
Corporation for approximately $32 million in cash, subject to adjustment. GS
Electric is a leading U.S. manufacturer of universal and permanent magnet motors
for the global floor-care and other markets. The acquired business generated
approximately $75 million in sales in 2000 and employed approximately 400
employees. The acquired business is now part of the Company's Electromechanical
Group.
The acquisitions were accounted for by the purchase method of accounting,
and, accordingly the results of their operations are included in the Company's
consolidated results from their respective dates of acquisition. Had these
acquisitions been made at the beginning of 2001 or 2000, they would not have had
a material effect on the sales or earnings reported.
6
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
Note 4 - Inventories
The estimated components of inventory stated at lower of LIFO cost or
market are:
In thousands
-----------------------------
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
Finished goods and parts $ 31,227 $ 22,879
Work in process 33,777 31,020
Raw materials and purchased parts 81,450 75,466
-------- --------
$146,454 $129,365
======== ========
Note 5 - Comprehensive Income
Comprehensive income includes all changes in stockholders' equity during
the period except those resulting from investments by and distributions to
stockholders. The following table presents comprehensive income for the three
and nine-month periods ended September 30, 2001 and 2000:
In thousands (Unaudited)
--------------------------------------------------------------
Three months ended Sept. 30, Nine months ended Sept. 30,
---------------------------- ---------------------------
2001 2000 2001 2000
-------- -------- -------- --------
Net income $ 17,727 $ 17,318 $ 54,652 $ 51,295
Foreign currency translation adjustment 42 (2,905) (4,464) (6,720)
Unrealized gain (loss) on marketable
securities and other (1,578) 786 (848) 1,322
-------- -------- -------- --------
Total comprehensive income $ 16,191 $ 15,199 $ 49,340 $ 45,897
======== ======== ======== ========
Note 6 - Segment Disclosure
The Company's two reportable business segments, the Electronic Instruments
Group and the Electromechanical Group are organized primarily on the basis of
product type, production processes, distribution methods, and management
organizations.
At September 30, 2001, there were no significant changes in identifiable
assets of reportable segments from the amounts disclosed at December 31, 2000,
nor were there any 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-month periods ended September 30,
2001 and 2000 can be found in the table on page 9 in the Management's Discussion
and Analysis section of this Report.
Note 7 - Revolving Credit Facility
On September 17, 2001, the Company completed a new $300 million, five-year
Revolving Credit Facility with a group of banks led by JPMorganChase. The new
credit facility is unsecured and replaced a $195 million credit facility which
was due to expire in 2002. The new agreement contains requirements, which among
other things, provide for compliance with certain financial ratios. At September
30, 2001, the Company met all such requirements.
7
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
At September 30, 2001, $153.3 million in revolving credit loans was
outstanding under the new facility, of which $80 million is classified as
short-term borrowings. The remaining $73.3 million, which was previously
considered short-term borrowings, is classified as long-term debt in the
accompanying balance sheet.
Note 8 - Accounting Pronouncements
FASB Statement No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities", became effective on April
1, 2001. The Company decided not to modify its existing accounts receivable
securitization agreements to meet the new accounting requirements to continue
sales treatment for financial assets transferred to its special purpose
subsidiary. Therefore, as of April 1, 2001, the Company recorded the outstanding
balance of the financial assets transferred to its special purpose subsidiary on
the Company's consolidated balance sheet as collateralized secured borrowings.
Such amount totaled $47 million in accounts receivable on April 1, 2001. This
change in accounting did not have a material effect on the Company's net income,
or earnings per share. As of September 30, 2001, the full $50 million secured
credit facility had been used.
In July 2001, the Financial Accounting Standards Board issued Statement
No. 141, "Accounting for Business Combinations", and Statement No. 142,
"Goodwill and Other Intangible Assets". Statement No. 141 modifies accounting
for business combinations after June 30, 2001, and requires use of the purchase
method of accounting. It also establishes new criteria for determining whether
intangible assets should be recognized separately from goodwill. Statement No.
142 is effective January 1, 2002, and will require that goodwill and intangibles
with indefinite useful lives no longer be amortized, (including goodwill that is
acquired in a business combination after June 30, 2001). Goodwill existing at
the date of adoption of Statement No. 142 would be tested for impairment at
least annually in accordance with the provisions of the Statement. Goodwill
acquired in business combinations completed before July 1, 2001 will discontinue
being amortized after December 31, 2001. The Company is currently assessing the
impact Statements No. 141 and No. 142 will have on its consolidated financial
statements upon adoption. Application of the non-amortization provisions of
Statement No. 142 is expected to result in the elimination of approximately $12
million of goodwill amortization expense annually. Upon initial adoption of
Statement No. 142, the Company does not expect the impairment provisions or
other provisions of the Statement to have a material effect on its results of
operations or financial position.
In August 2001, the Financial Accounting Standards Board issued Statement
No. 144, "Impairment or Disposal of Long-lived Assets". Statement No. 144
supersedes Statement No. 121, "Accounting for the Impairment of Long-lived
Assets and for Long-lived Assets to be Disposed of", and provides a single
accounting model for long-lived assets to be disposed of. Statement No. 144 is
effective for the Company's financial statements beginning in January 2002. The
Company is currently studying the future effects of adopting this Statement.
8
AMETEK, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The following table sets forth sales and income by reportable segment, and
consolidated operating and pretax income:
Three months ended Sept. 30, Nine months ended Sept. 30,
--------------------------- ---------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
(Dollars in thousands)
Net sales
Electronic Instruments $ 126,619 $ 124,206 $ 375,466 $ 381,055
Electromechanical 129,914 130,892 406,560 385,359
--------- --------- --------- ---------
Consolidated net sales $ 256,533 $ 255,098 $ 782,026 $ 766,414
========= ========= ========= =========
Operating income and income before income taxes
Electronic Instruments $ 18,174 $ 19,658 $ 55,547 $ 58,309
Electromechanical 19,138 19,776 62,548 58,676
--------- --------- --------- ---------
Total segment operating income 37,312 39,434 118,095 116,985
Corporate and other (4,346) (5,328) (13,852) (15,222)
--------- --------- --------- ---------
Consolidated operating income 32,966 34,106 104,243 101,763
Interest and other expenses, net (6,034) (7,590) (20,493) (22,032)
--------- --------- --------- ---------
Consolidated income
before income taxes $ 26,932 $ 26,516 $ 83,750 $ 79,731
========= ========= ========= =========
Operations for the third quarter of 2001 compared with the third quarter of 2000
In this difficult economic environment, the Company reported increased sales and
net income.
Net sales for the third quarter of 2001 were $256.5 million, an increase of $1.4
million, compared with the third quarter 2000 net sales of $255.1 million. Net
sales for the Electronic Instruments Group (EIG) increased $2.4 million or 1.9%
in the third quarter of 2001, due to the July 2001 acquisition of EDAX, Inc.,
along with continued strength in the aerospace and power instrument markets.
These increases were partially offset by continued weakness in the Company's
process and industrial businesses including its heavy-vehicle instruments
business. Net sales for the Electromechanical Group (EMG) were down $1.0
million, or 0.8% in the third quarter of 2001. The added sales from the May 2001
acquisition of GS Electric, along with the August 2000 acquisition of the
Prestolite businesses was more than offset by weakness in the rest of EMG driven
by the slowing economy both in the U.S. and Europe.
Total segment operating income for the third quarter of 2001 was $37.3 million,
a decrease of $2.1 million or 5.4% from $39.4 million in the third quarter of
2000. Segment operating income as a
9
AMETEK, Inc.
RESULTS OF OPERATIONS (CONTINUED)
percentage of sales decreased to 14.5% of sales in the third quarter of 2001
from 15.5% of sales in the third quarter of 2000. The Company continues to
accelerate its cost reduction initiatives, which it began implementing in the
fourth quarter of 2000. These initiatives include a more aggressive movement of
certain production to low-cost locales and headcount reductions. Without these
operating costs, segment operating income would have increased slightly in the
third quarter of 2001.
Corporate expenses for the third quarter of 2001 were $4.3 million, a decrease
of $1.0 million or 18.4%, from $5.3 million in the third quarter of 2000. The
2001 amount represents 1.6% of sales, compared to 2.1% of sales in 2000. The
decrease reflects the impact of corporate cost reduction activities primarily
resulting from reduced information technology and travel expenses. After
deducting corporate expenses, consolidated operating income totaled $33.0
million, or 12.9% of sales for the third quarter of 2001, compared with $34.1
million, or 13.4% of sales for the 2000 third quarter.
Interest and other expenses, net were $6.0 million in the third quarter of 2001,
compared with $7.6 million for the same quarter of 2000, a decrease of $1.6
million or 20.5%. Interest expense decreased $1.4 million in the third quarter
of 2001 primarily resulting from lower interest rates.
Net income for the third quarter of 2001 totaled $17.7 million, up 2.4% from
$17.3 million in the third quarter of 2000. Diluted earnings per share were
unchanged at $0.53 per share.
Due to the slow economic environment and the aftermath of the events of
September 11, 2001, the Company's order input is showing significant weakening.
As a result, the Company expects that its fourth quarter operating results will
be lower than the fourth quarter of 2000.
Segment Results
Electronic Instruments Group (EIG) net sales totaled $126.6 million in the third
quarter of 2001, an increase of $2.4 million or 1.9% from the same quarter of
2000. The July 2001 acquisition of EDAX, Inc. as well as the continued strength
in the aerospace and power instrument markets led to the moderate sales
increase. The continued economic slowdown in the Company's process and
industrial businesses as well as lower demand in the heavy-vehicle instruments
business, partially offset EIG's sales increase.
EIG's operating income was $18.2 million for the third quarter of 2001, a
decrease of $1.5 million or 7.6% when compared with the third quarter of 2000.
Lower base business sales and expenses in connection with cost reduction
activities drove lower group operating income. Without these expenses, the
Group's operating income would have been essentially flat with the third quarter
of 2000. The Group's operating margins were 14.4% of sales in the third quarter
2001, compared to 15.8% for the same period in 2000.
10
AMETEK, Inc.
RESULTS OF OPERATIONS (CONTINUED)
Electromechanical Group (EMG) net sales totaled $129.9 million in the third
quarter 2001, a decrease of $1.0 million, compared to the same quarter in 2000.
Weakness in the North American and European floor-care markets, along with lower
sales of specialty metal products depressed third quarter sales. The acquisition
of GS Electric in May 2001 and the Prestolite businesses in the third quarter of
2000 helped offset most of EMG's decreased sales.
EMG's operating income was $19.1 million for the third quarter 2001, a decrease
of $0.6 million or 3.2% compared with the third quarter of 2000. The lower
profits resulted from the lower sales as well as expenses associated with cost
reduction activities during the quarter. Without these expenses, the Group's
operating income would have increased slightly from the third quarter of 2000.
The profit contribution from the 2001 acquisition, as well as improvements from
the Group's relocation of certain manufacturing to low-cost locales, partially
offset the operating income decline. Group operating income as a percentage of
sales for the third quarter of 2001 was 14.7%, compared with operating margins
of 15.1% in the third quarter of 2000.
Operations for the first nine months of 2001 compared with the first nine months
of 2000.
Net sales for the first nine months of 2001 were $782.0 million, an increase of
$15.6 million or 2.0% higher than net sales of $766.4 million reported for the
first nine months of 2000. EIG's net sales decreased by $5.6 million or 1.5% in
the current nine month period due to the continued economic slowdown in process
and industrial markets, including the heavy-vehicle instruments market.
Partially offsetting EIG's decline in net sales was the acquisition of the
Rochester Instrument business in the second half of 2000 and the EDAX, Inc.
acquisition in July 2001, as well as higher sales from the aerospace and power
instruments businesses. EMG's net sales increased $21.2 million or 5.5%, driven
by the acquisition of businesses in the second half of 2000 and in 2001.
Without the acquisitions, EMG's net sales would have declined, largely due to
continued weakness in the U.S. and European motor markets.
New orders for the nine months ended September 30, 2001 were $791.7
million, compared to $794.7 million for the same period in 2000. The Company's
backlog of unfilled orders at September 30, 2001 was $266.2 million, compared
to $256.5 million at December 31, 2000.
Segment operating income for the first nine months of 2001 was $118.1 million,
an increase of $1.1 million compared with the same period in 2000. As a
percentage of sales, segment operating income for the first nine months of 2001
remained relatively unchanged at 15.1% from 15.3% for the comparable period.
Profit margins in both operating segments continued to be strong due to the
acceleration of cost reduction initiatives, which began in the fourth quarter of
2000, and operational excellence programs. These initiatives include the
transition of a portion of the Company's motor and instruments production to a
low-cost manufacturing facility in Mexico. Motor production is also being
transferred to low-cost manufacturing plants in China and the Czech Republic.
11
AMETEK, Inc.
RESULTS OF OPERATIONS (CONTINUED)
Corporate expenses were $13.9 million, a decrease of $1.3 million or 9.0% when
compared with the same period in 2000. The decrease was primarily due to lower
general and administrative expenses as a result of corporate cost cutting
initiatives. Such expenses were 1.8% of sales in the current nine month period
compared with 2.0% of sales in the comparable period in 2000.
Operating income was $104.2 million for the nine month period ended September
30, 2001, an increase of $2.5 million or 2.4% when compared with the same period
in 2000. This represents an operating income margin of 13.3% for the first nine
months of 2001 which is unchanged from the same period in 2000.
Interest and other expenses were $20.5 million for the first nine months of
2001, a decrease of $1.5 million or 6.8% when compared with the first nine
months of 2000. A decrease in interest expense due to overall lower interest
rates was partially offset by higher average debt levels to fund acquisitions in
the period. The Company also had other income of $0.8 million for the nine
months ended September 30, 2001, compared with other expenses of $0.5 million
for the same period of 2000. This change resulted primarily from increased gains
on sales of marketable securities by its captive insurance subsidiary.
The effective tax rate for the nine months ended September 30, 2001 was 34.7%,
compared with 35.7% in the comparable period of 2000. The lower tax rate in the
current nine month period was primarily due to higher tax credits associated
with export sales.
Net income for the first nine months in 2001 was $54.7 million, or $1.63 per
share on a diluted basis, compared with net income of $51.3 million, or $1.58
per diluted share for the first nine months of 2000.
Segment Results
Electronic Instruments Group (EIG), net sales were $375.5 million for the first
nine months of 2001, a decrease of $5.6 million or 1.5% compared with the same
period of 2000. Net sales decreased due to the general economic slowdown in
markets for the Company's process and industrial products along with the
heavy-vehicle instruments market. The September 2000 acquisition of Rochester
Instrument Systems and the July 2001 acquisition of EDAX, Inc., along with
continued strength in aerospace and power instrument markets partially offset
the Group's sales decrease.
EIG's operating income for the first nine months of 2001 totaled $55.5 million,
a decrease of $2.8 million or 4.7% compared with the first nine months of 2000
primarily due to the sales decline mentioned above. The Group's operating
margins were 14.8% of sales in the first nine months of 2001, compared to 15.3%
for the first nine months of 2000. Cost reduction initiatives and operational
excellence programs, partially offset the Group's lower operating results.
12
AMETEK, Inc.
RESULTS OF OPERATIONS (CONTINUED)
In the Electromechanical Group (EMG) net sales totaled $406.6 million for the
first nine months of 2001, an increase of $21.2 million or 5.5% compared with
the same period in 2000. Acquisitions in the second half of 2000 and in 2001
were the reason for the net sales increase. A reduction in foreign currency
sales to local floor-care markets in Europe was further adversely affected by
the impact of translating foreign currencies to U.S. dollars through the first
nine months of 2001.
EMG's operating income for the first nine months of 2001 was $62.5 million, an
increase of $3.9 million or 6.6% when compared with the same period in 2000.
Group operating income as a percentage of sales for the first nine months of
2001 was 15.4%, a slight improvement from the 15.2% margin for the comparable
period in 2000. Lower operating costs in the Group's worldwide motor operations
as a result of the cost reduction initiatives resulted in the profit margin
improvement year-to-year.
FINANCIAL CONDITION
Liquidity and Capital Resources
Cash provided by operating activities before accounts receivable securitization
transactions totaled $48.5 million in the first nine months of 2001, compared
with $46.3 million for the same period in 2000, an increase of $2.2 million. The
increase was due to the higher net income and lower working capital
requirements, partially offset by an increase in other non-current assets. As
discussed in note 8 to the financial statements, on April 1, 2001, the Company
recognized accounts receivable, which were previously transferred to an
unconsolidated special purpose subsidiary as collateralized secured short-term
borrowings. For the nine months ended September 30, 2001, the Company had a net
change in securitized accounts receivable totaling $45 million in connection
with its accounts receivable securitization program. After reflecting the second
quarter change in accounts receivable securitization program, cash generated by
operating activities totaled $3.5 million for the first nine months of 2001,
compared with cash generated of $51.3 million in the same period of 2000.
13
AMETEK, Inc
Results of Operations (continued)
Cash used for investing activities totaled $84.0 million in the first nine
months of 2001, compared with $96.6 million of cash used in the first nine
months of 2000. Acquisitions in the first nine months of 2001 required cash
outlays of $68.1 million, compared with $81.0 million in the comparable 2000
period. Additions to property, plant and equipment totaled $21.4 million for
the first nine months of 2001, compared with $17.7 million expended in the
comparable period of 2000.
Financing activities provided cash of $81.2 million for the first nine months
of 2001, compared with cash provided for financing activities of $43.6 million
in the same period of 2000. The increase in financing activities in the first
nine months of 2001 was primarily due to increased borrowings under a new
Revolving Credit Facility, which was completed in September 2001. The new
five-year $300 million credit facility replaced a $195 million credit facility
which was due to expire in 2002, and provides the Company with the necessary
flexibility to support its growth plans. Borrowings, principally from revolving
credit loans, increased $87.1 million in the first nine months of 2001, of
which $13.8 million is considered short-term borrowings and $73.3 million is
considered long-term debt. Borrowings in the first nine months of 2000 were
$49.3 million. The 2001 borrowings reflect the accounts receivable
securitization transaction and acquisitions discussed above. Repurchases of the
Company's common stock as of September 30, 2001 totaled $11.6 million for
440,000 acquired shares in the third quarter of 2001 compared to $1.6 million
for 83,500 acquired shares in the first nine months of 2000. Net cash proceeds
from the exercise of employee stock options and other items net totaled $11.6
million for the nine months ended September 30, 2001, compared with $1.7
million in the nine months ended September 30, 2000.
At September 30, 2001, total debt outstanding was $447.2 million compared with
$406.2 million, on a comparable basis, at December 31, 2000. Debt as a
percentage of capitalization decreased to 57.8% at September 30, 2001 from
59.1% at December 31, 2000. EBITDA (income before income taxes, interest
expense, interest income, depreciation and amortization) was $137.7 million for
the nine month period ended September 30, 2001 compared with $131.6 million for
the same period in 2000. EBITDA covered interest expense 6.5 times in the 2001
period compared with 6.1 times in the comparable period of 2000.
As a result of all of the activities discussed above, the Company's cash and
cash equivalents at September 30, 2001 totaled $7.9 million, compared with $7.2
million at December 31, 2000. The Company also had unused borrowing commitments
of $129.7 million under its new $300 million revolving bank credit facility
available at September 30, 2001. The Company believes it has sufficient
cash-generating capabilities and available credit facilities to enable it to
meet its needs in the foreseeable future.
14
Forward-looking Information
Information contained in this discussion, other than historical information, are
considered "forward-looking statements" and may be subject to change based on
various important factors and uncertainties. Some, but not all, of the factors
and uncertainties that may cause actual results to differ significantly from
those expected in any forward-looking statement are disclosed in the Company's
2000 Form 10-K as filed with the Securities and Exchange Commission.
15
AMETEK, Inc.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
Exhibit
Number Description
--------- -------------------------------------------------------
10.1 Credit Agreement dated as of September 17, 2001, among
the Company, Various Lending Institutions, First Union
National Bank and PNC Bank N.A., as Syndication Agents,
Bankers Trust Company as Document Agent, and The Chase
Manhattan Bank, as Administrative Agent.
10.2 Amendment No. 14 to the Retirement and Savings Plan
b) Reports on Form 8-K: During the quarter ended September 30, 2001, the
Company filed a Current Report on Form 8-K dated September 19, 2001, under
Item 5. Other Events, to report the completion of a new five-year Revolving
Credit Facility dated as of September 17, 2001.
16
AMETEK, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMETEK, Inc.
----------------------------------------------
(Registrant)
By /s/ Robert R. Mandos, Jr.
----------------------------------------------
Robert R. Mandos, Jr.
Vice President & Comptroller
(Principal Accounting Officer)
November 9, 2001
17