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 March 31, 2002
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 April 30,
2002 was 33,023,919 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 Months Ended March 31, 2002 and 2001 ................. 3
Consolidated Balance Sheet as of
March 31, 2002 and December 31, 2001 ............................ 4
Condensed Consolidated Statement of Cash Flows for
the Three Months Ended March 31, 2002 and 2001 ................. 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 ................................13
SIGNATURES ...................................................................14
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
March 31,
-------------------------------------
2002 2001
----------- -----------
Net sales $ 263,558 $ 264,071
----------- -----------
Expenses:
Cost of sales, excluding depreciation 191,786 195,924
Selling, general and administrative 27,775 24,144
Depreciation 7,563 8,300
----------- -----------
Total expenses 227,124 228,368
----------- -----------
Operating income 36,434 35,703
Other income (expenses):
Interest expense (6,894) (7,660)
Other, net (196) 255
----------- -----------
Income before income taxes 29,344 28,298
Provision for income taxes 9,679 10,026
----------- -----------
Net Income $ 19,665 $ 18,272
=========== ===========
Basic earnings per share $ 0.60 $ 0.56
=========== ===========
Diluted earnings per share $ 0.59 $ 0.55
=========== ===========
Average common shares outstanding:
Basic shares 32,799 32,624
=========== ===========
Diluted shares 33,506 33,243
=========== ===========
Dividends paid per share $ 0.06 $ 0.06
=========== ===========
See accompanying notes.
3
AMETEK, Inc.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
March 31, December 31,
2002 2001
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 12,360 $ 14,139
Marketable securities 9,431 8,215
Receivables, less allowance for possible losses 196,925 181,031
Inventories 146,425 152,525
Deferred income taxes 9,991 10,096
Other current assets 15,590 13,341
----------- -----------
Total current assets 390,722 379,347
----------- -----------
Property, plant and equipment, at cost 562,160 561,753
Less accumulated depreciation (352,007) (347,259)
----------- -----------
210,153 214,494
----------- -----------
Goodwill, net of accumulated amortization 384,713 387,420
Investments and other assets 50,974 48,028
----------- -----------
Total assets $ 1,036,562 $ 1,029,289
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $ 160,532 $ 167,399
Accounts payable 81,704 86,707
Accruals 81,518 82,044
----------- -----------
Total current liabilities 323,754 336,150
Long-term debt 302,766 303,434
Deferred income taxes 34,955 33,496
Other long-term liabilities 20,065 21,151
Stockholders' equity:
Common stock 336 334
Capital in excess of par value 4,113 683
Retained earnings 406,627 388,929
Accumulated other comprehensive losses (38,788) (37,023)
Treasury stock (17,266) (17,865)
----------- -----------
355,022 335,058
----------- -----------
Total liabilities and stockholders' equity $ 1,036,562 $ 1,029,289
=========== ===========
See accompanying notes.
4
AMETEK, Inc.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three months ended
March 31,
---------------------------------
2002 2001
--------- ---------
Cash provided by (used for):
Operating activities:
Net income $ 19,665 $ 18,272
Adjustments to reconcile net income to total operating activities:
Depreciation and amortization 7,932 11,256
Deferred income taxes 1,735 1,328
Net change in assets and liabilities (18,443) (28,954)
Other (1,934) (4,765)
--------- ---------
Total operating activities (before receivable securitization transactions) 8,955 (2,863)
Increase in accounts receivable securitization -- 2,000
--------- ---------
Total operating activities 8,955 (863)
--------- ---------
Investing activities:
Additions to property, plant and equipment (4,052) (7,013)
Other (1,224) 1,302
--------- ---------
Total investing activities (5,276) (5,711)
--------- ---------
Financing activities:
Net change in short-term borrowings (7,492) 3,302
Cash dividends paid (1,967) (1,961)
Proceeds from stock options and other 4,001 5,253
--------- ---------
Total financing activities (5,458) 6,594
--------- ---------
(Decrease) increase in cash and cash equivalents (1,779) 20
Cash and cash equivalents:
As of January 1 14,139 7,187
--------- ---------
As of March 31 $ 12,360 $ 7,207
========= =========
See accompanying notes.
5
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
(Unaudited)
Note 1 - Financial Statement Presentation
The accompanying consolidated financial statements are unaudited. The
Company believes that all adjustments (which consist of normal recurring
accruals) necessary for a fair presentation of the consolidated financial
position of the Company at March 31, 2002 and the consolidated results of its
operations and cash flows for the three-month periods ended March 31, 2002 and
2001 have been included. Quarterly results of operations are not necessarily
indicative of results for the full year. Quarterly financial statements should
be read in conjunction with the financial statements and related notes presented
in the Company's 2001 Form 10-K as filed with the Securities and Exchange
Commission.
Note 2 - Earnings Per Share
The calculation of basic earnings per share for the three-month periods
ended March 31, 2002 and 2001 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)
Three months ended March 31,
--------------------------
2002 2001
------ ------
(Unaudited)
Basic 32,799 32,624
Stock option and award plans 707 619
------ ------
Diluted 33,506 33,243
====== ======
Note 3 - Inventories
The estimated components of inventory stated at lower of LIFO cost or
market are:
(In thousands)
--------------------------
March 31, December 31,
2002 2001
-------- --------
(Unaudited)
Finished goods and parts $ 32,803 $ 31,313
Work in process 35,237 36,925
Raw materials and purchased parts 78,385 84,287
-------- --------
$146,425 $152,525
======== ========
6
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
(Unaudited)
Note 4 - Comprehensive Income
Comprehensive income includes all changes in stockholders' equity during
a period except those resulting from investments by and distributions to
stockholders. The following table presents comprehensive income for the
three-month periods ended March 31, 2002 and 2001:
(In thousands)
Three months ended March 31,
-----------------------
2002 2001
-------- --------
(Unaudited)
Net income $ 19,665 $ 18,272
Foreign currency translation adjustment (1,833) (3,750)
Unrealized gain on marketable securities 68 527
-------- --------
Total comprehensive income $ 17,900 $ 15,049
======== ========
Note 5 - Segment Disclosure
The Company has two reportable business segments, the Electronic
Instruments Group and the Electromechanical Group. The Company organizes its
businesses primarily on the basis of product type, production processes,
distribution methods, and management organizations.
At March 31, 2002, there were no significant changes in identifiable
assets of reportable segments from the amounts disclosed at December 31, 2001,
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 month period ended March 31, 2002 and 2001 can
be found in the table on page 9 in the Management's Discussion & Analysis
section of this Report.
Note 6 - New Accounting Pronouncements
Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets."
SFAS No. 142 no longer permits the amortization of goodwill and indefinite-lived
intangible assets. Instead, these assets must be tested for impairment at least
annually in accordance with the provisions of the Statement. As of January 1,
2002, the Company no longer amortizes goodwill.
7
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
(Unaudited)
The Company's net income and earnings per share for the three months
ended March 31, 2002 and 2001 adjusted to exclude goodwill amortization was as
follows (in thousands, except per share amounts):
Three months ended March 31,
2002 2001
---------- ----------
(Unaudited)
Reported net income $ 19,665 $ 18,272
Add back goodwill amortization,
net of tax -- 2,315
---------- ----------
Adjusted net income $ 19,665 $ 20,587
========== ==========
Basic earnings per share
as reported $ 0.60 $ 0.56
Goodwill amortization, net of tax -- 0.07
---------- ----------
Adjusted basic earnings per share $ 0.60 $ 0.63
========== ==========
Diluted earnings per share
as reported $ 0.59 $ 0.55
Goodwill amortization, net of tax -- 0.07
---------- ----------
Adjusted diluted earnings per share $ 0.59 $ 0.62
========== ==========
The Company has essentially completed the transitional impairment test
of its goodwill, and will finalize this assessment by the end of the second
quarter of 2002 as provided by the implementation provision of the Statement.
Although the final analysis is being completed, the Company's current valuation
indicates that there is no impairment of its goodwill. During the three months
ended March 31, 2002, changes to goodwill primarily resulted from purchase
accounting adjustments related to recent acquisitions. Goodwill as of March 31,
2002 was allocated by segment as follows: Electronic Instrument Group (EIG) -
$239.9 million; Electromechanical Group (EMG) - $144.8 million.
Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 144, "Impairment or Disposal of Long-lived
Assets". SFAS No. 144 supersedes SFAS 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. The adoption of
this Statement had no effect on the Company's consolidated results of
operations, financial position, or cash flows.
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 reportable segment operating
results, consolidated operating income, and income before income taxes:
Three months ended March 31,
2002 2001
--------- ---------
(Dollars in thousands)
Net sales
Electronic Instruments $ 136,801 $ 126,028
Electromechanical 126,757 138,043
--------- ---------
Consolidated net sales $ 263,558 $ 264,071
========= =========
Operating income and income before income taxes
Electronic Instruments $ 20,959 $ 18,844
Electromechanical 20,573 21,891
--------- ---------
Total segment operating income 41,532 40,735
Corporate and other (5,098) (5,032)
--------- ---------
Consolidated operating income 36,434 35,703
Interest and other expenses, net (7,090) (7,405)
--------- ---------
Consolidated income before income taxes $ 29,344 $ 28,298
========= =========
Operations for the first quarter of 2002 compared with the first quarter of 2001
Net sales for the first quarter of 2002 were $263.6 million, essentially
unchanged from sales of $264.1 million in the first quarter of 2001. Net sales
for the Electronic Instruments Group (EIG) increased $10.8 million or 8.5% in
the first quarter of 2002, primarily due to the recent acquisitions of
Instruments for Research and Applied Science (IRAS) and EDAX, Inc., as well as
continued strength in the Company's aerospace and power instrument businesses.
Net sales for the Electromechanical Group (EMG) were down $11.3 million or 8.2%
in the first quarter of 2002. Continued adverse market conditions in the global
floor care markets were partially offset by the 2001 acquisition of GS Electric.
Without these recent acquisitions, consolidated sales for the first quarter of
2002 would have been 13.1% lower than the first quarter of 2001.
New orders for the first quarter of 2002 were $263.6 million, down $14.3 million
or 5.2% when compared with the same quarter in 2001. The first quarter of 2001
was an unusually strong quarter for orders within the Company's aerospace and
power instrument businesses. The Company's backlog of unfilled orders at March
31, 2002 was $276.5 million, essentially unchanged from December 31, 2001.
9
AMETEK, Inc.
RESULTS OF OPERATIONS (CONTINUED)
Segment operating income for the first quarter 2002 was $41.5 million, an
increase of $0.8 million or 2.0% when compared with the first quarter
2001. Segment operating income as a percentage of sales increased to 15.8%
of sales in the current quarter from 15.4% of sales in the first quarter
of 2001. Higher operating income was primarily driven by the recent
acquisitions and the non-amortization of goodwill in the first quarter of
2002. The Company also is benefiting from its fourth quarter 2001 cost
reduction initiatives.
Selling, general and administrative expenses were $27.8 million in the
first quarter of 2002, an increase of $3.7 million or 15.0% when compared
with the first quarter of 2001. Selling expenses as a percentage of sales
increased to 8.7% in the first quarter of 2002 compared with 7.3% in the
first quarter of 2001. Recent acquisitions drove the increase in selling
expenses. General and administrative expenses and selling expenses by base
businesses decreased as a percentage of sales during the period,
reflecting the Company's cost reduction initiatives.
Consolidated operating income totaled $36.4 million, or 13.8% of sales,
compared with $35.7 million, or 13.5% of sales for the first quarter of
2001, an increase of $0.7 million, or 2.0%.
Interest expense was $6.9 million in the first quarter 2002, compared with
$7.7 million for the same quarter of 2001. The $0.8 million decrease in
the first quarter of 2002 was due to lower interest rates partially offset
by higher debt levels compared to the first quarter of 2001.
The effective tax rate for the first quarter of 2002 was 33.0% compared
with 35.4% in the first quarter of 2001. The lower tax rate in 2002
reflects the effect of adopting SFAS No. 142, which resulted in the
elimination of the tax effect of non-deductible goodwill from the
Company's tax provision.
Net income for the first quarter 2002 totaled $19.7 million, an increase
of 7.6% from $18.3 million in the first quarter of 2001. Diluted earnings
per share rose 7.3% to $0.59 per share, compared with $0.55 per share for
the same quarter of 2001. The first quarter of 2001 included goodwill
amortization of $2.3 million after tax, or $0.07 per diluted share.
Segment Results
Electronic Instruments Group ("EIG") sales were $136.8 million in the
first quarter 2002, an increase of $10.8 million or 8.5% from the same
quarter of 2001. The higher sales were due to the recent acquisitions of
IRAS and EDAX, Inc., as well as continued strength in the aerospace and
power instrument businesses. Without these recent acquisitions, EIG's
sales for the first quarter of 2002 would have been 8.0% lower than the
first quarter of 2001.
EIG's operating income for the first quarter of 2002 increased by $2.1
million or 11.2% to $21.0 million when compared with the same quarter of
2001. The increase in operating income was due to the non-amortization of
goodwill in 2002, the sales increase, as well as improved operating
margins resulting from the cost reduction initiatives, noted above. EIG's
pretax goodwill
10
AMETEK, Inc.
RESULTS OF OPERATIONS (CONTINUED)
amortization in the first quarter of 2001 amounted to $1.6 million.
Operating margins were 15.3% of sales in the first quarter of 2002
compared with operating margins of 15.0% of sales in the first quarter of
2001.
Electromechanical Group (EMG) sales totaled $126.8 million in the first
quarter of 2002, a decrease of $11.3 million or 8.2% from the same quarter
of 2001. The sales decrease was primarily due to the continued adverse
market conditions in the worldwide floor care markets, partially offset by
the 2001 acquisition of GS Electric. Without the recent acquisition, EMG's
sales for the first quarter of 2002 would have been 17.7% lower than the
first quarter of 2001.
Operating income of EMG was $20.6 million for the first quarter 2002, a
decrease of $1.3 million or 6.0% from the first quarter of 2001. The lower
profits were mainly due to the sales decrease, partially offset by profit
margin improvement, which was the result of the cost reduction
initiatives, noted above. Operating income in 2002 benefited from the
effect of non-amortization of goodwill. EMG's pretax goodwill amortization
in the first quarter of 2001 amounted to $1.1 million. Operating margins
were 16.2% of sales in the first quarter of 2002, compared with operating
margins of 15.9% of sales in the first quarter of 2001.
FINANCIAL CONDITION
Liquidity and Capital Resources
Cash provided by operating activities totaled $9.0 million for the first
quarter of 2002, compared to cash used of $2.9 million (before accounts
receivable securitization transactions) in the first quarter 2001. The
$11.9 million increase in operating cash flow was the result of lower
working capital requirements in the first quarter of 2002, mainly due to
lower inventories. The first quarter of 2001 included a build-up in
inventories associated with the Company's movement of certain products to
low-cost manufacturing facilities, and higher inventory levels in several
businesses that experienced the economic downturn. After tax cash
expenditures in the first quarter of 2002 related to the Company's fourth
quarter 2001 accruals for cost reduction initiatives were on plan, and
totaled $1.4 million. The Company expects to make additional after tax
cash expenditures on these initiatives of approximately $6.0 million for
the remainder of 2002. Net cash provided by operating activities in the
first quarter 2002 totaled $9.0 million, compared to cash used in the
first quarter of 2001 of $0.9 million, after $2.0 million of proceeds from
an accounts receivable securitization agreement.
Cash used for investing activities totaled $5.3 million in the first
quarter 2002, compared with $5.7 million used in the same quarter of 2001.
Additions to property, plant and equipment in the first quarter 2002
totaled $4.1 million, compared with $7.0 million in the same quarter of
2001.
11
AMETEK, Inc.
FINANCIAL CONDITION (CONTINUED)
Cash used for financing activities in the first quarter of 2002 totaled
$5.5 million, compared with cash provided by financing activities of $6.6
million in the same quarter of 2001. In the first quarter of 2002, net
short-term borrowings decreased by $7.5 million, compared with an increase
of $3.3 million in 2001.
As a result of all of the activities discussed above, the Company's cash
and cash equivalents at March 31, 2002 totaled $12.4 million, compared
with $14.1 million at December 31, 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.
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 2001 Form 10-K as filed with the
Securities and Exchange Commission.
12
PART II. OTHER INFORMATION
AMETEK, Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
None
b) Reports on Form 8-K: During the quarter ended March 31, 2002, the
Company filed a Current Report on Form 8-K dated February 1, 2002,
under Item 5. Other Events, to report the issuance of the Company's
2001 full-year and fourth quarter sales and earnings press release.
13
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)
May 10, 2002
14