e10vk
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2009
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number 1-12981
AMETEK, Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
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14-1682544
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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37 North Valley Road, Building 4
P.O. Box 1764
Paoli, Pennsylvania
(Address of principal executive
offices)
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19301-0801
(Zip Code)
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Registrants
telephone number, including area code:
(610) 647-2121
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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Common Stock, $0.01 Par Value (voting)
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes o No þ
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 þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act.
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o
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(Do not check if a
smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value of the voting stock held by
non-affiliates of the registrant was $3,716,907,826 as of
June 30, 2009, the last business day of the
registrants most recently completed second fiscal quarter.
The number of shares of the registrants Common Stock
outstanding as of January 29, 2010 was 107,910,425.
Documents
Incorporated by Reference
Part III incorporates information by reference from the
Proxy Statement for the Annual Meeting of Stockholders on
April 28, 2010.
AMETEK,
Inc.
2009
Form 10-K
Annual Report
Table of
Contents
1
PART I
General
Development of Business
AMETEK, Inc. (AMETEK or the Company) is
incorporated in Delaware. Its predecessor was originally
incorporated in Delaware in 1930 under the name American Machine
and Metals, Inc. The Company maintains its principal executive
offices in suburban Philadelphia, Pennsylvania at 37 North
Valley Road, Building 4, Paoli, Pennsylvania 19301. AMETEK is a
leading global manufacturer of electronic instruments and
electromechanical devices with operations in North America,
Europe, Asia and South America. The Company is listed on the New
York Stock Exchange (symbol: AME). The common stock of AMETEK is
a component of the S&P MidCap 400 and the Russell 1000
Indices.
Website
Access to Information
The Companys annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and all amendments to those reports filed or furnished pursuant
to Section 13(a) of the Securities Exchange Act of 1934 are
made available free of charge on the Companys website at
www.ametek.com (in the Investors
Financial News and Information section), as soon as
reasonably practicable after such material is electronically
filed with, or furnished to, the Securities and Exchange
Commission. The Company has posted, free of charge, to the
investor information portion of its website, its corporate
governance guidelines, Board committee charters and codes of
ethics. Such documents are also available in published form,
free of charge, to any stockholder who requests them by writing
to the Investor Relations Department at AMETEK, Inc., 37 North
Valley Road, Building 4, Paoli, Pennsylvania 19301.
Products
and Services
The Company markets its products worldwide through two operating
groups, the Electronic Instruments Group (EIG) and
the Electromechanical Group (EMG). EIG builds
monitoring, testing, calibration and display devices for the
process, aerospace, industrial and power markets. EMG is a
supplier of electromechanical devices. EMG produces highly
engineered electromechanical connectors for hermetic
(moisture-proof) applications, specialty metals for niche
markets and brushless air-moving motors, blowers and heat
exchangers. End markets include aerospace, defense, mass
transit, medical, office products and other industrial markets.
The Company believes that EMG is the worlds largest
manufacturer of air-moving electric motors for vacuum cleaners
and is a prominent producer of motors for other floor care
products. The Company continues to grow through strategic
acquisitions focused on differentiated niche markets in
instrumentation and electromechanical devices.
Competitive
Strengths
Management believes that the Company has several significant
competitive advantages that assist it in sustaining and
enhancing its market positions. Its principal strengths include:
Significant Market Share. AMETEK maintains a
significant share in many of its targeted niche markets because
of its ability to produce and deliver high-quality products at
competitive prices. In EIG, the Company maintains significant
market positions in many niche segments within the process,
aerospace, industrial and power instrumentation markets. In EMG,
the Company maintains significant market positions in many niche
segments including aerospace, defense, mass transit, medical,
office products and air-moving motors for the floor care market.
Technological and Development
Capabilities. AMETEK believes it has certain
technological advantages over its competitors that allow it to
develop innovative products and maintain leading market
positions. Historically, the Company has grown by extending its
technical expertise into the manufacture of customized products
for its customers, as well as through strategic acquisitions.
EIG competes primarily on the basis of product innovation in
several highly specialized instrumentation markets, including
process measurement, aerospace, power and heavy-vehicle
dashboard instrumentation. EMGs differentiated businesses
focus on
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developing customized products for specialized applications in
aerospace and defense, medical, business machines and other
industrial applications. In its cost-driven motor business, EMG
focuses on low-cost design and manufacturing, while enhancing
motor-blower performance through advances in power, efficiency,
lighter weight and quieter operation.
Efficient and Low-Cost Manufacturing
Operations. EMG has motor manufacturing plants in
China, the Czech Republic, Mexico and Brazil to lower its costs
and achieve strategic proximity to its customers, providing the
opportunity to increase international sales and market share.
Certain of the Companys electronic instrument businesses
have relocated manufacturing operations to low-cost locales.
Furthermore, strategic acquisitions and joint ventures in
Europe, North America and Asia have resulted in additional cost
savings and synergies through the consolidation of operations,
product lines and distribution channels, which benefits both
operating groups.
Experienced Management Team. Another key
component of AMETEKs success is the strength of its
management team and its commitment to the performance of the
Company. AMETEKs senior management has extensive
experience, averaging approximately 24 years with the
Company, and is financially committed to the Companys
success through Company-established stock ownership guidelines
and equity incentive programs.
Business
Strategy
AMETEKs objectives are to increase the Companys
earnings and financial returns through a combination of
operational and financial strategies. Those operational
strategies include business acquisitions, new product
development, global and market expansion and Operational
Excellence programs designed to achieve double-digit annual
percentage growth in earnings per share over the business cycle
and a superior return on total capital. To support those
operational objectives, financial initiatives have been, or may
be, undertaken, including public and private debt or equity
issuance, bank debt refinancing, local financing in certain
foreign countries, accounts receivable securitization and share
repurchases. AMETEKs commitment to earnings growth is
reflected in its continued implementation of cost-reduction
programs designed to achieve the Companys long-term
best-cost objectives.
AMETEKs Corporate Growth Plan consists of four key
strategies:
Operational Excellence. Operational Excellence
is AMETEKs cornerstone strategy for improving profit
margins and strengthening the Companys competitive
position across its businesses. Through its Operational
Excellence strategy, the Company seeks to reduce production
costs and improve its market positions. The strategy has played
a key role in achieving synergies from newly acquired companies.
AMETEK believes that Operational Excellence, which focuses on
Six Sigma process improvements, global sourcing and lean
manufacturing and also emphasizes team building and a
participative management culture, has enabled the Company to
improve operating efficiencies and product quality, increase
customer satisfaction and yield higher cash flow from
operations, while lowering operating and administrative costs
and shortening manufacturing cycle times.
New Product Development. AMETEK enjoys an
excellent reputation for product innovation, technical know-how
and new product development. Among its most recent product
introductions are:
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JOFRA®
RTC-156 reference temperature calibrator that incorporates a
number of performance features that make it the most advanced
dry-block temperature calibrator available;
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SPECTROMAXxtm
stationery metal analyzer the fifth generation of
this highly successful trace element analyzer offers improved
flexibility, reduced cost and greater ease of use;
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AMETEK®
Model 5100 line of non-contact gas analyzers based on tunable
diode laser absorption technology for natural gas pipeline
applications;
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AMETEK®
hydraulic pressure transducers, hydraulic temperature sensors,
flight data system accelerometers and a suite of cooling fans
that were selected for the ultra-long range, technically
advanced Gulfstream G650 business jet;
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Broadband FOCUS integrated multiplexer allows electric utilities
and industrial power users to upgrade their communications
networks to gigabit speeds without replacing existing equipment;
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Vision Research Phantom v12 high-speed camera, which can shoot
at speeds up to one million frames per second that was
recognized by Popular Science magazine as one of the most
innovative technical products of the year;
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PITTMAN®
6000 brushless DC servo motors that are engineered to deliver
more power in a smaller package for a wide range of data
storage, medical/biotech, semiconductor processing and motion
control applications;
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SAiGEtm
ground breaking remote uninterruptible power supply (UPS)
monitoring system that is ideally suited for the power
generation, petrochemical, chemical, offshore oil and gas and
other process control industries;
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Drexelbrook®
Safety IntelliPoint RF level switch, the first RF Admittance
level switch to meet the American Petroleum Institutes
recommended practice for overfill and spill protection for
ground level bulk storage facilities;
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AMETEK®
6.6-inch diameter motor-blower achieves significantly greater
efficiency and life expectancy in the same footprint as a
5.7-inch diameter blower for a wide range of vacuum and blower
applications.
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Global and Market Expansion. AMETEKs
largest presence outside the United States is in Europe, where
it has operations in the United Kingdom, Germany, Denmark,
Italy, the Czech Republic, Romania, France, Austria and the
Netherlands. These operations provide design, engineering and
manufacturing capability, product-line breadth, enhanced
European distribution channels and low-cost production. AMETEK
has a leading market position in European floor care motors and
a significant presence in many of its instrument businesses. It
has grown sales in Latin America and Asia by building and
expanding low-cost electric motor and instrument plants in
Reynosa, Mexico and motor manufacturing plants near Sao Paulo,
Brazil and in Shanghai, China. It also continues to achieve
geographic expansion and market expansion in Asia through joint
ventures in China, Taiwan and Japan and a direct sales and
marketing presence in Singapore, Japan, China, Taiwan, Hong
Kong, South Korea, India, the Middle East and Russia.
Strategic Acquisitions and Alliances. The
Company continues to pursue strategic acquisitions, both
domestically and internationally, to expand and strengthen its
product lines, improve its market share positions and increase
earnings through sales growth and operational efficiencies at
the acquired businesses. Since the beginning of 2005, through
December 31, 2009, the Company has completed 24
acquisitions with annualized sales totaling approximately
$1.0 billion, including three acquisitions in 2009 (see
Recent Acquisitions). Through these and prior
acquisitions, the Companys management team has gained
considerable experience in successfully acquiring and
integrating new businesses. The Company intends to continue to
pursue this acquisition strategy.
2009
OVERVIEW
Operating
Performance
In 2009, AMETEK generated sales of $2.1 billion, a decrease
of 17% from 2008. The Companys results include the
contributions of recently acquired businesses and the
Companys continuing cost reduction initiatives.
Financing
During the second quarter of 2009, the Company paid in full a
40 million British pound ($62.0 million) borrowing
under the revolving credit facility. At December 31, 2009,
the Company had no borrowings outstanding under the revolving
credit facility. The $100 million accounts receivable
securitization facility was not renewed by the Company in May
2009.
In the third quarter of 2008, the Company completed a private
placement agreement to sell $350 million in senior notes to
a group of institutional investors. There were two funding dates
for the senior notes. The first funding
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occurred in September 2008 for $250 million, consisting of
$90 million in aggregate principal amount of
6.59% senior notes due September 2015 and $160 million
in aggregate principal amount of 7.08% senior notes due
September 2018. The second funding date occurred in December
2008 for $100 million, consisting of $35 million in
aggregate principal amount of 6.69% senior notes due
December 2015 and $65 million in aggregate principal amount
of 7.18% senior notes due December 2018. The senior notes
carry a weighted average interest rate of 6.93%. The proceeds
from the senior notes were used to pay down a portion of the
borrowings outstanding under the Companys revolving credit
facility.
In July 2008, the Company paid in full the $225 million
7.20% senior notes due July 2008 using the proceeds from
borrowings under its existing revolving credit facility. Also in
July 2008, the Company obtained the second funding of
$80 million in aggregate principal amount of
6.35% senior notes due July 2018 under the 2007 private
placement agreement, which completed the sale of
$450 million in senior notes to a group of institutional
investors. The first funding of the 2007 private placement
occurred in December 2007 for $370 million, consisting of
$270 million in aggregate principal amount of
6.20% senior notes due December 2017 and $100 million
in aggregate principal amount of 6.30% senior notes due
December 2019.
Recent
Acquisitions
The Company spent approximately $72.9 million in cash, net
of cash acquired, for business acquisitions in 2009.
In January 2009, the Company acquired High Standard Aviation, a
provider of electric and electromechanical, hydraulic, and
pneumatic repair services to the aerospace industry. High
Standard Aviation is a part of EMG.
In September 2009, the Company completed a small acquisition of
two related businesses in India, Unispec Marketing Pvt. Ltd. and
Thelsha Technical Services Pvt. Ltd. These businesses provide an
established sales, distribution and service network in India and
are a part of EIG.
In December 2009, the Company acquired Ameron Global, a
manufacturer of highly engineered pressurized gas components and
systems for commercial and aerospace customers. Ameron Global is
also a leader in maintenance, repair and overhaul of fire
suppression and oxygen supply systems. Ameron Global is a part
of EMG.
Financial
Information About Reportable Segments, Foreign Operations and
Export Sales
Information with respect to reportable segments and geographic
areas is set forth in Note 17 to the Consolidated Financial
Statements.
The Companys international sales decreased 16% to
$1,031.7 million in 2009. The decrease was driven by the
decline in international sales from base businesses, partially
offset by the impact of acquisitions completed in 2009 and 2008.
The Company experienced decreases in export sales of products
manufactured in the United States, as well as decreased sales
from overseas operations. International sales represented 49% of
consolidated net sales in 2009 compared with 48% in 2008.
Description
of Business
The products and markets of each reportable segment are
described below:
EIG
EIG is comprised of a group of differentiated businesses. EIG
applies its specialized market focus and technology to
manufacture instruments used for testing, monitoring,
calibration and display for the process, aerospace, industrial
and power markets. EIGs growth is based on the four
strategies outlined in AMETEKs Corporate Growth Plan. EIG
designs products that, in many instances, are significantly
different from, or technologically better than, competing
products. It has reduced costs by implementing operational
improvements, achieving acquisition synergies, improving supply
chain management, moving production to low-cost locales and
reducing headcount. EIG is among the leaders in many of the
specialized markets it serves, including aerospace engine
sensors, heavy-vehicle instrument panels, analytical
instrumentation, level measurement products, power
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instruments and pressure gauges. It has joint venture operations
in China, Taiwan and Japan. 53% of EIGs 2009 sales were to
markets outside the United States.
At December 31, 2009, EIG employed approximately
4,800 people, of whom approximately 800 were covered by
collective bargaining agreements. EIG had 48 manufacturing
facilities: 34 in the United States, seven in the United
Kingdom, two in Germany and one each in France, Austria,
Denmark, Argentina and Canada at December 31, 2009. EIG
also shares manufacturing facilities with EMG in Mexico.
Process
and Analytical Instrumentation Markets and Products
63% of EIGs 2009 sales were from instruments for
process and analytical measurement and analysis. These include:
oxygen, moisture, combustion and liquid analyzers; emission
monitors; spectrometers; mechanical and electronic pressure
sensors and transmitters; radiation measurement devices; level
measurement devices; precision pumping systems; and
force-measurement and materials testing instrumentation.
EIGs focus is on the process industries, including oil,
gas and petrochemical refining, power generation, specialty gas
production, water and waste treatment, natural gas distribution
and semiconductor manufacturing. AMETEKs analytical
instruments are also used for precision measurement in a number
of other applications including radiation detection for Homeland
Security, materials analysis, nanotechnology research and other
test and measurement applications.
Unispec Marketing Pvt. Ltd. and Thelsha Technical Services Pvt.
Ltd., acquired in September 2009, provides an established sales,
distribution and service network in India serving the quality
control and analytical instrumentation market. These
acquisitions strengthen our presence in India through AMETEK
Instruments India Private Limited (AIIPL), established in early
2009. AIIPL provides a full range of pre- and post-sales support
to customers from a newly opened facility in Whitefield,
Bangalore.
Vision Research, Inc., acquired in June 2008, is a global leader
and innovator in high-speed digital imaging technology. Its
highly differentiated products include a broad array of
high-speed digital cameras for capturing data in product
characterization and motion analysis applications, including a
high-speed digital camera, the
Phantom®
v12, capable of capturing one million pictures per second.
Power and
Industrial Instrumentation Markets and Products
21% of EIGs 2009 sales were to the power and
industrial instrumentation markets.
AMETEKs Power businesses provide analytical instruments,
uninterruptible power supply systems and programmable power
supplies used in a wide variety of industrial settings.
EIG is a leader in the design and manufacture of power
measurement and recording instrumentation used by the electric
power and manufacturing industries. Those products include power
transducers and meters, event and transient recorders,
annunciators and alarm monitoring systems used to measure,
monitor and record variables in the transmission and
distribution of electric power.
EIGs Solidstate Controls designs and manufactures
uninterruptible power supply systems for the process and power
generation industries. EIG also manufactures sensor systems for
land-based gas turbines and for boilers and burners used by the
utility, petrochemical, process and marine industries worldwide.
EIGs programmable power business is a leader in
programmable AC and DC power sources and pursues growth
opportunities in the highly attractive electronic test and
measurement equipment market.
The programmable power business of Xantrex Technology, Inc.,
acquired in July 2008, is a leader in programmable AC and DC
power sources used to test electrical and electronic products by
simulating various input voltages, frequencies and potentially
harmful line transients. Its products are used in design
verification testing, manufacturing, quality assurance and
regulatory compliance by its customers in a wide range of
industries, including aviation, military, and general
electronics.
EIGs Instrumentation and Specialty Controls business is a
leading North American manufacturer of dashboard instruments for
heavy trucks and is also among the major suppliers of similar
products for construction vehicles. It has strong product
development capability in solid-state instruments that primarily
monitor and display
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engine operating parameters. EIG has a leading position in the
food service instrumentation market and is a primary source for
stand-alone and integrated timing controls for the food service
industry.
Aerospace
Instrumentation Markets and Products
16% of EIGs 2009 sales were from aerospace products.
AMETEKs aerospace products are designed to customer
specifications and are manufactured to stringent operational and
reliability requirements. Its aerospace business operates in
specialized markets, where its products have a technological
and/or cost
advantage. Acquisitions have complemented and expanded
EIGs core sensor and transducer product line, used in a
wide range of aerospace applications.
Aerospace products include: airborne data systems; turbine
engine temperature measurement products; vibration-monitoring
systems; indicators; displays; fuel and fluid measurement
products; sensors; switches; cable harnesses; and transducers.
EIG serves all segments of commercial aerospace, including
helicopters, business jets, commuter aircraft and commercial
airliners, as well as the military market.
Among its more significant competitive advantages are EIGs
50-plus years of experience as an aerospace supplier and its
long-standing customer relationships with global commercial
aircraft Original Equipment Manufacturers (OEMs).
Its customers are the leading producers of airframes and jet
engines and other aerospace system integrators. It also serves
the commercial aerospace aftermarket with spare part sales and
repair and overhaul services.
Customers
EIG is not dependent on any single customer such that the loss
of that customer would have a material adverse effect on
EIGs operations. Approximately 14% of EIGs 2009
sales were made to its five largest customers and no one
customer accounted for 10% or more of 2009 consolidated net
sales.
EMG
EMG is among the leaders in many of the specialized markets it
serves, including highly engineered motors, blowers, fans, heat
exchangers, connectors, and other electromechanical products or
systems for commercial and military aerospace applications,
defense, medical equipment, business machines, computers and
other power or industrial applications. In its cost-driven motor
business, the Company believes that EMG is the worlds
largest producer of high-speed, air-moving electric motors for
OEMs of floor care products. EMG designs products that, in many
instances, are significantly different from, or technologically
better than, competing products. It has reduced costs by
implementing operational improvements, achieving acquisition
synergies, improving supply chain management, moving production
to low-cost locales and reducing headcount. 45% of EMGs
2009 sales were to customers outside the United States.
At December 31, 2009, EMG employed approximately
5,100 people, of whom approximately 1,900 were covered by
collective bargaining agreements (including some that are
covered by local unions). EMG had 51 manufacturing facilities:
30 in the United States, ten in the United Kingdom, three in
France, two each in Italy, Mexico and the Czech Republic and one
each in China and Brazil at December 31, 2009.
Differentiated
Businesses
Differentiated businesses account for an increasing proportion
of EMGs overall sales base. Differentiated businesses
represented 76% of EMGs sales in 2009 and are comprised of
the technical motors and systems businesses and the engineered
materials, interconnects and packaging businesses.
Technical
Motors and Systems Markets and Products
Technical motors and systems, representing 49% of EMGs
2009 sales, consist of brushless motors, blowers and pumps, as
well as other electromechanical systems. These products are used
in aerospace and defense, business machines, computer equipment,
mass transit vehicles, medical equipment, power, and industrial
applications.
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EMG produces electronically commutated (brushless) motors,
blowers and pumps that offer long life, reliability and near
maintenance-free operation. These motor-blower systems and heat
exchangers are used for thermal management and other
applications on a wide variety of military and commercial
aircraft and military ground vehicles, and are used increasingly
in medical and other applications, in which their long life, and
spark-free and reliable operation is very important. These
motors provide cooling and ventilation for business machines,
computers and mass transit vehicles.
EMG also serves the commercial and military aerospace third
party maintenance, repair and overhaul (MRO) market.
These businesses provide these services on a global basis with
facilities in the United States, Europe, and Singapore.
Ameron Global, acquired in December 2009, is a manufacturer of
highly engineered pressurized gas components and systems for
commercial and aerospace customers and is a leader in MRO of
fire suppression and oxygen supply systems.
High Standard Aviation, acquired in January 2009, is a provider
of electrical and electromechanical, hydraulic and pneumatic
repair services to the aerospace industry.
Muirhead Aerospace Limited, acquired in November 2008, is a
leading manufacturer of motion technology products and a
provider of avionics repair and overhaul services for the
aerospace and defense markets.
MCG, acquired in February 2008, is a leading global manufacturer
of highly customized motors and motion control solutions for the
medical, life sciences, industrial automation, semiconductor and
aviation markets.
Drake Air, also acquired in February 2008, provides
heat-transfer repair services to the commercial aerospace
industry and represents a further expansion of AMETEKs
growing presence in the global aerospace MRO industry.
Engineered
Materials, Interconnects and Packaging Markets and
Products
27% of EMGs 2009 sales are engineered materials,
interconnects and packaging products. AMETEK is an innovator and
market leader in specialized metal powder, strip, wire and
bonded products. It produces stainless steel and nickel clad
alloys; stainless steel, cobalt and nickel alloy powders; metal
strip; specialty shaped and electronic wire; and advanced metal
matrix composites used in electronic thermal management. Its
products are used in automotive, appliance, medical and
surgical, aerospace, telecommunications, marine and general
industrial applications. Its niche market focus is based upon
proprietary manufacturing technology and strong customer
relationships.
Reading Alloys, acquired in April 2008, is a niche specialty
metals producer. It produces titanium master alloys and expands
our position in customized titanium products. Reading Alloys
adds to our capabilities in strip and foil products used in
medical devices, electronic components and aerospace
instruments. Its metal powder production techniques complement
our existing gas and water atomization capabilities.
Floor
Care and Specialty Motor Markets and Products
24% of EMGs 2009 sales are to floor care and
specialty motor markets, where it has the leading share, through
its sales of air-moving electric motors to most of the
worlds major floor care OEMs, including vertically
integrated OEMs that produce some of their own motors. EMG
produces motor-blowers for a full range of floor care products,
ranging from hand-held, canister and upright vacuums to central
vacuums for residential use. High-performance vacuum motors also
are marketed for commercial and industrial applications.
The Company also manufactures a variety of specialty motors used
in a wide range of products, such as household and personal care
appliances; fitness equipment; electric materials handling
vehicles; and sewing machines. Additionally, its products are
used in outdoor power equipment, such as electric chain saws,
leaf blowers, string trimmers and power washers.
EMG has been successful in directing a portion of its global
floor care marketing at vertically integrated vacuum cleaner
manufacturers, who seek to outsource all or part of their motor
production. By purchasing their motors from EMG, these customers
are able to realize economic and operational advantages by
reducing or
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discontinuing their own motor production and avoiding the
capital investment required to keep their motor manufacturing
current with changing technologies and market demands.
Customers
EMG is not dependent on any single customer such that the loss
of that customer would have a material adverse effect on
EMGs operations. Approximately 10% of EMGs 2009
sales were made to its five largest customers and no one
customer accounted for 10% or more of 2009 consolidated net
sales.
Marketing
The Companys marketing efforts generally are organized and
carried out at the division level. EIG makes significant use of
distributors and sales representatives in marketing its
products, as well as direct sales in some of its more
technically sophisticated products. Within aerospace, its
specialized customer base of aircraft and jet engine
manufacturers is served primarily by direct sales engineers.
Given the technical nature of many of its products, as well as
its significant worldwide market share, EMG conducts much of its
domestic and international marketing activities through a direct
sales force and makes some use of sales representatives and
distributors both in the United States and in other countries.
Competition
In general, most of the Companys markets are highly
competitive. The principal elements of competition for the
Companys products are price, product technology,
distribution, quality and service.
In the markets served by EIG, the Company believes that it ranks
among the leading U.S. producers of certain measuring and
control instruments. It also is a leader in the
U.S. heavy-vehicle instrumentation and power instrument
markets and one of the leading instrument and sensor suppliers
to the commercial aviation market. Competition remains strong
and can intensify for certain EIG products, especially its
pressure gauge and heavy-vehicle instrumentation products. Both
of these businesses have several strong competitors. In the
process and analytical instruments market, numerous companies in
each specialized market compete on the basis of product quality,
performance and innovation. The aerospace and power instrument
businesses have a number of diversified competitors, which vary
depending on the specific market niche.
EMGs differentiated businesses have competition from a
limited number of companies in each of their markets.
Competition is generally based on product innovation,
performance and price. There also is competition from
alternative materials and processes. In its cost-driven
businesses, EMG has limited domestic competition in the
U.S. floor care market from independent manufacturers.
Competition is increasing from Asian motor manufacturers that
serve both the U.S. and the European floor care markets.
Increasingly, global vacuum motor production is being shifted to
Asia where AMETEK has a smaller but growing market position.
There is potential competition from vertically integrated
manufacturers of floor care products that produce their own
motor-blowers. Many of these manufacturers would also be
potential EMG customers if they decided to outsource their motor
production.
Backlog
and Seasonal Variations of Business
The Companys backlog of unfilled orders by business
segment was as follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Electronic Instruments
|
|
$
|
284.3
|
|
|
$
|
324.8
|
|
|
$
|
314.1
|
|
Electromechanical
|
|
|
364.1
|
|
|
|
393.8
|
|
|
|
374.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
648.4
|
|
|
$
|
718.6
|
|
|
$
|
688.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The lower backlog at December 31, 2009 was primarily due to
the global economic recession, partially offset by the
acquisition of High Standard Aviation and Ameron Global in 2009
and the positive impact of a weakening U.S. dollar when
compared to the British pound and Euro.
9
Of the total backlog of unfilled orders at December 31,
2009, approximately 82% is expected to be shipped by
December 31, 2010. The Company believes that neither its
business as a whole, nor either of its reportable segments, is
subject to significant seasonal variations, although certain
individual operations experience some seasonal variability.
Availability
of Raw Materials
The Companys reportable segments obtain raw materials and
supplies from a variety of sources and generally from more than
one supplier. However, for EMG, certain items, including various
base metals and certain steel components, are available only
from a limited number of suppliers. The Company believes its
sources and supplies of raw materials are adequate for its needs.
Research,
Product Development and Engineering
The Company is committed to research, product development and
engineering activities that are designed to identify and develop
potential new and improved products or enhance existing
products. Research, product development and engineering costs
before customer reimbursement were $101.4 million,
$115.9 million and $102.9 million in 2009, 2008 and
2007, respectively. Customer reimbursements in 2009, 2008 and
2007 were $5.5 million, $6.1 million and
$7.1 million, respectively. These amounts included net
Company-funded research and development expenses of
$50.5 million, $57.5 million and $52.9 million,
respectively. All such expenditures were directed toward the
development of new products and processes and the improvement of
existing products and processes.
Environmental
Matters
Information with respect to environmental matters is set forth
in the section of Managements Discussion and Analysis of
Financial Condition and Results of Operations entitled
Environmental Matters and in Note 19 to the
Consolidated Financial Statements.
Patents,
Licenses and Trademarks
The Company owns numerous unexpired U.S. patents and
foreign patents, including counterparts of its more important
U.S. patents, in the major industrial countries of the
world. The Company is a licensor or licensee under patent
agreements of various types and its products are marketed under
various registered and unregistered U.S. and foreign
trademarks and trade names. However, the Company does not
consider any single patent or trademark, or any group thereof,
essential either to its business as a whole or to either of its
business segments. The annual royalties received or paid under
license agreements are not significant to either of its
reportable segments or to the Companys overall operations.
Employees
At December 31, 2009, the Company employed approximately
10,100 people in its EMG, EIG and corporate operations, of
whom approximately 2,600 employees were covered by
collective bargaining agreements. The Company has five
collective bargaining agreements that will expire in 2010, which
covers less than 200 employees. The Company expects no
material adverse effects from the pending labor contract
negotiations.
Working
Capital Practices
The Company does not have extraordinary working capital
requirements in either of its reportable segments. Customers
generally are billed at normal trade terms, which may include
extended payment provisions. Inventories are closely controlled
and maintained at levels related to production cycles and are
responsive to the normal delivery requirements of customers.
10
You should consider carefully the following risk factors and all
other information contained in this Annual Report on
Form 10-K
and the documents we incorporate by reference in this Annual
Report on
Form 10-K.
Any of the following risks could materially and adversely affect
our business, results of operations, liquidity and financial
condition.
Current
economic conditions and uncertain economic outlook could
adversely affect our results of operations and financial
condition.
The global economy has recently undergone a period of
unprecedented volatility and distress in financial markets, as
well as a general slowdown in demand, including in many of the
end markets we serve. A prolonged period of economic decline or
stagnation could have a material adverse effect on our results
of operations and financial condition and exacerbate the other
risk factors we have described below. These economic
developments affect businesses such as ours in a number of ways.
Our global business is adversely affected by decreases in the
general level of economic activity, such as decreases in
business and consumer spending, capital spending, air travel,
industrial production and government procurement. Any economic
slowdown results in a decrease in or cancellation of orders for
our products and services and negatively impacts the ability of
our customers to make timely payments. In addition, the
potential for one or more of our customers or suppliers to
experience financial distress or bankruptcy is increased.
Furthermore, a disparate impact on, or government actions
affecting, one of the major economies could produce volatility
in the rate of exchange for the U.S. dollar against certain
major currencies, adversely affecting our results. We are unable
to predict the timing, duration and severity of any further
disruptions in financial markets or adverse economic conditions
in the U.S. and other countries.
A
prolonged downturn in the aerospace and defense, process
instrumentation or electric motor businesses could adversely
affect our business.
Several of the industries in which we operate are cyclical in
nature and therefore are affected by factors beyond our control.
A prolonged downturn in the aerospace and defense, process
instrumentation or electric motor businesses could have an
adverse effect on our business, financial condition and results
of operations.
Our
growth strategy includes strategic acquisitions. We may not be
able to consummate future acquisitions or successfully integrate
recent and future acquisitions.
A portion of our growth has been attributed to acquisitions of
strategic businesses. Since the beginning of 2005, through
December 31, 2009, we have completed 24 acquisitions. We
plan to continue making strategic acquisitions to enhance our
global market position and broaden our product offerings.
Although we have been successful with our acquisition strategies
in the past, our ability to successfully effectuate acquisitions
will be dependent upon a number of factors, including:
|
|
|
|
|
Our ability to identify acceptable acquisition candidates;
|
|
|
|
The impact of increased competition for acquisitions, which may
increase acquisition costs and affect our ability to consummate
acquisitions on favorable terms and may result in us assuming a
greater portion of the sellers liabilities;
|
|
|
|
Successfully integrating acquired businesses, including
integrating the financial, technological and management
processes, procedures and controls of the acquired businesses
with those of our existing operations;
|
|
|
|
Adequate financing for acquisitions being available on terms
acceptable to us;
|
|
|
|
U.S. and foreign competition laws and regulations affecting
our ability to make certain acquisitions;
|
|
|
|
Unexpected losses of key employees, customers and suppliers of
acquired businesses;
|
|
|
|
Mitigating assumed, contingent and unknown liabilities; and
|
|
|
|
Challenges in managing the increased scope, geographic diversity
and complexity of our operations.
|
11
The process of integrating acquired businesses into our existing
operations may result in unforeseen operating difficulties and
may require additional financial resources and attention from
management that would otherwise be available for the ongoing
development or expansion of our existing operations.
Furthermore, even if successfully integrated, the acquired
business may not achieve the results we expected or produce
expected benefits in the time frame planned. Failure to continue
with our acquisition strategy and the successful integration of
acquired businesses could have a material adverse effect on our
business, results of operations, liquidity and financial
condition.
We may
experience unanticipated
start-up
expenses and production delays in opening new facilities or
product line transfers.
Certain of our businesses are relocating or have recently
relocated manufacturing operations to low-cost locales.
Unanticipated
start-up
expenses and production delays in opening new facilities or
completing product line transfers, as well as possible
underutilization of our existing facilities, could result in
production inefficiencies, which would adversely affect our
business and operations.
Our
substantial international sales and operations are subject to
customary risks associated with international
operations.
International sales for 2009 and 2008 represented 49% and 48% of
our consolidated net sales, respectively. As a result of our
growth strategy, we anticipate that the percentage of sales
outside the United States will increase in the future.
International operations are subject to the customary risks of
operating in an international environment, including:
|
|
|
|
|
Potential imposition of trade or foreign exchange restrictions;
|
|
|
|
Overlap of different tax structures;
|
|
|
|
Unexpected changes in regulatory requirements;
|
|
|
|
Changes in tariffs and trade barriers;
|
|
|
|
Fluctuations in foreign currency exchange rates, including
changes in the relative value of currencies in the countries
where we operate, subjecting us to exchange rate exposures;
|
|
|
|
Restrictions on currency repatriation;
|
|
|
|
General economic conditions;
|
|
|
|
Unstable political situations;
|
|
|
|
Nationalization of assets; and
|
|
|
|
Compliance with a wide variety of international and
U.S. laws and regulatory requirements.
|
Our
international sales and operations may be adversely impacted by
compliance with export laws.
We are required to comply with various import, export, export
control and economic sanctions laws, which may affect our
transactions with certain customers, business partners and other
persons, including in certain cases dealings with or between our
employees and subsidiaries. In certain circumstances, export
control and economic sanctions regulations may prohibit the
export of certain products, services and technologies and in
other circumstances, we may be required to obtain an export
license before exporting a controlled item. In addition, failure
to comply with any of these regulations could result in civil
and criminal, monetary and non-monetary penalties, disruptions
to our business, limitations on our ability to import and export
products and services and damage to our reputation.
12
Any
inability to hire, train and retain a sufficient number of
skilled officers and other employees could impede our ability to
compete successfully.
If we cannot hire, train and retain a sufficient number of
qualified employees, we may not be able to effectively integrate
acquired businesses and realize anticipated performance results
from those businesses, manage our expanding international
operations and otherwise profitably grow our business. Even if
we do hire and retain a sufficient number of employees, the
expense necessary to attract and motivate these officers and
employees may adversely affect our results of operations.
If we
are unable to develop new products on a timely basis, it could
adversely affect our business and prospects.
We believe that our future success depends, in part, on our
ability to develop, on a timely basis, technologically advanced
products that meet or exceed appropriate industry standards.
Although we believe we have certain technological and other
advantages over our competitors, maintaining such advantages
will require us to continue investing in research and
development and sales and marketing. There can be no assurance
that we will have sufficient resources to make such investments,
that we will be able to make the technological advances
necessary to maintain such competitive advantages or that we can
recover major research and development expenses. We are not
currently aware of any emerging standards or new products, which
could render our existing products obsolete, although there can
be no assurance that this will not occur or that we will be able
to develop and successfully market new products.
A
shortage of or price increases in our raw materials could
increase our operating costs.
We have multiple sources of supplies for our major raw material
requirements and we are not dependent on any one supplier;
however, certain items, including base metals and certain steel
components, are available only from a limited number of
suppliers and are subject to commodity market fluctuations.
Shortages in raw materials or price increases therefore could
affect the prices we charge, our operating costs and our
competitive position, which could adversely affect our business,
results of operations, liquidity and financial condition.
Certain
environmental risks may cause us to be liable for costs
associated with hazardous or toxic substance
clean-up
which may adversely affect our financial
condition.
Our businesses, operations and facilities are subject to a
number of federal, state, local and foreign environmental and
occupational health and safety laws and regulations concerning,
among other things, air emissions, discharges to waters and the
use, manufacturing, generation, handling, storage,
transportation and disposal of hazardous substances and wastes.
Environmental risks are inherent in many of our manufacturing
operations. Certain laws provide that a current or previous
owner or operator of property may be liable for the costs of
investigating, removing and remediating hazardous materials at
such property, regardless of whether the owner or operator knew
of, or was responsible for, the presence of such hazardous
materials. In addition, the Comprehensive Environmental
Response, Compensation and Liability Act generally imposes joint
and several liability for
clean-up
costs, without regard to fault, on parties contributing
hazardous substances to sites designated for
clean-up
under the Act. We have been named a potentially responsible
party at several sites, which are the subject of
government-mandated
clean-ups.
As the result of our ownership and operation of facilities that
use, manufacture, store, handle and dispose of various hazardous
materials, we may incur substantial costs for investigation,
removal, remediation and capital expenditures related to
compliance with environmental laws. While it is not possible to
precisely quantify the potential financial impact of pending
environmental matters, based on our experience to date, we
believe that the outcome of these matters is not likely to have
a material adverse effect on our financial position or future
results of operations. In addition, new laws and regulations,
new classification of hazardous materials, stricter enforcement
of existing laws and regulations, the discovery of previously
unknown contamination or the imposition of new
clean-up
requirements could require us to incur costs or become the basis
for new or increased liabilities that could have a material
adverse effect on our business, financial condition and results
of operations. There can be no assurance that future
environmental liabilities will not occur or that environmental
damages due to prior or present practices will not result in
future liabilities.
13
We are
subject to numerous governmental regulations, which may be
burdensome or lead to significant costs.
Our operations are subject to numerous federal, state, local and
foreign governmental laws and regulations. In addition, existing
laws and regulations may be revised or reinterpreted and new
laws and regulations, including with respect to climate change,
may be adopted or become applicable to us or customers for our
products. We cannot predict the form any such new laws or
regulations will take or the impact any of these laws and
regulations will have on our business or operations.
We may
be required to defend lawsuits or pay damages in connection with
alleged or actual harm caused by our products.
We face an inherent business risk of exposure to product
liability claims in the event that the use of our products is
alleged to have resulted in harm to others or to property. For
example, our operations expose us to potential liabilities for
personal injury or death as a result of the failure of, for
instance, an aircraft component that has been designed,
manufactured or serviced by us. We may incur a significant
liability if product liability lawsuits against us are
successful. While we believe our current general liability and
product liability insurance is adequate to protect us from
future claims, we cannot assure that coverage will be adequate
to cover all claims that may arise. Additionally, we may not be
able to maintain insurance coverage in the future at an
acceptable cost. Any liability not covered by insurance or for
which third-party indemnification is not available could have a
material adverse effect on our business, financial condition and
results of operations.
We
operate in highly competitive industries, which may adversely
affect our results of operations or ability to expand our
business.
Our markets are highly competitive. We compete, domestically and
internationally, with individual producers, as well as with
vertically integrated manufacturers, some of which have
resources greater than we do. The principal elements of
competition for our products are price, product technology,
distribution, quality and service. EMGs competition in
specialty metal products stems from alternative materials and
processes. In the markets served by EIG, although we believe EIG
is a market leader, competition is strong and could intensify.
In the pressure gauge, aerospace and heavy-vehicle markets
served by EIG, a limited number of companies compete on the
basis of product quality, performance and innovation. Our
competitors may develop new or improve existing products that
are superior to our products or may adapt more readily to new
technologies or changing requirements of our customers. There
can be no assurance that our business will not be adversely
affected by increased competition in the markets in which it
operates or that our products will be able to compete
successfully with those of our competitors.
Our
access to sources of liquidity may be limited by market
conditions and restrictions in our revolving credit facility and
other agreements.
In 2009, the financial markets have experienced a significant
liquidity shortfall as a result of diverse conditions that have
caused the failure and near failure of a number of large
financial services companies. If the availability of funds
remains limited, we could incur increased costs associated with
renewal of our credit facility
and/or other
debt instruments. In addition, it is possible that our ability
to access the credit market may be limited by these or other
factors, at a time when we would like, or need, to do so, which
could have an impact on our ability to refinance maturing debt
and/or react
to changing economic and business conditions. Notwithstanding
the foregoing, at this time, we believe that available
short-term and long-term capital resources are sufficient to
fund our working capital requirements, scheduled debt payments,
interest payments, capital expenditures, benefit plan
contributions, income tax obligations, dividends to our
shareholders, any contemplated acquisitions and share
repurchases for the foreseeable future.
We are
subject to possible insolvency of financial
counterparties.
We engage in numerous financial transactions and contracts
including insurance policies, letters of credit, credit
facilities, financial derivatives and investment management
agreements involving various counterparties. We
14
are subject to the risk that one or more of these counterparties
may become insolvent and, therefore, be unable to discharge its
obligations under such contracts.
Our
goodwill and other intangible assets represent a substantial
amount of our total assets and write-off of such substantial
goodwill and intangible assets could have a negative impact on
our financial condition and results of operations.
Our total assets include substantial amounts of intangible
assets, primarily goodwill. At December 31, 2009, goodwill
and other intangible assets, net of accumulated amortization,
totaled $1,799.2 million or 55% of our total assets. The
goodwill results from our acquisitions, representing the excess
of cost over the fair value of the net tangible and other
identifiable intangible assets we have acquired. At a minimum,
we assess annually whether there has been impairment in the
value of our intangible assets. If future operating performance
at one or more of our business units were to fall significantly
below current levels, we could reflect, under current applicable
accounting rules, a non-cash charge to operating earnings for
goodwill or other intangible asset impairment. Any determination
requiring the write-off of a significant portion of goodwill or
other intangible assets would negatively affect our financial
condition and results of operations.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
The Company has 99 operating plant facilities in 22 states
and 12 foreign countries. Of these facilities, 50 are owned by
the Company and 49 are leased. The properties owned by the
Company consist of approximately 640 acres, of which
approximately 4.3 million square feet are under roof. Under
lease is a total of approximately 1.5 million square feet.
The leases expire over a range of years from 2010 to 2082, with
renewal options for varying terms contained in many of the
leases. Production facilities in China, Taiwan and Japan provide
the Company with additional production capacity through the
Companys investment in 50% or less owned joint ventures.
The Companys executive offices in Paoli, Pennsylvania,
occupy approximately 34,000 square feet under a lease that
expires in September 2010.
The Companys machinery and equipment, plants and offices
are in satisfactory operating condition and are adequate for the
uses to which they are put. The operating facilities of the
Company by business segment was as follows at December 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Operating
|
|
|
|
|
|
|
Plant Facilities
|
|
|
Square Feet Under Roof
|
|
|
|
Owned
|
|
|
Leased
|
|
|
Owned
|
|
|
Leased
|
|
|
Electronic Instruments
|
|
|
25
|
|
|
|
23
|
|
|
|
1,994,000
|
|
|
|
788,000
|
|
Electromechanical
|
|
|
25
|
|
|
|
26
|
|
|
|
2,257,000
|
|
|
|
685,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
50
|
|
|
|
49
|
|
|
|
4,251,000
|
|
|
|
1,473,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
Item 3.
|
Legal
Proceedings
|
The Company
and/or its
subsidiaries have been named as defendants, along with many
other companies, in a number of asbestos-related lawsuits. To
date, no judgments have been entered against the Company. The
Company believes it has strong defenses to the claims and
intends to continue to defend itself vigorously in these
matters. Other companies are also indemnifying the Company
against certain of these claims. To date, these parties have met
their obligations in all material respects; however, one of
these companies filed for bankruptcy liquidation in 2007.
In August 2009, the Company agreed to a Stipulation and
Settlement Agreement with the San Diego Regional Water
Quality Control Board regarding the 2008 Notice of
Administrative Civil Liability related to a former subsidiary
which became a separate company in 1988 and filed for bankruptcy
liquidation in 2007, whereby the Company paid and deferred minor
penalties, which were covered by previously established
reserves. (Also see Environmental Matters in
Managements Discussion and Analysis of Financial Condition
and Results of Operations and Note 19 to the Consolidated
Financial Statements.)
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
No matters were submitted to a vote of the Companys
security holders, through the solicitation of proxies or
otherwise, during the last quarter of the fiscal year ended
December 31, 2009.
16
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
The principal market on which the Companys common stock is
traded is the New York Stock Exchange and it is traded under the
symbol AME. On January 29, 2010, there were
approximately 2,200 holders of record of the Companys
common stock.
Market price and dividend information with respect to the
Companys common stock is set forth below. Future dividend
payments by the Company will be dependent on future earnings,
financial requirements, contractual provisions of debt
agreements and other relevant factors.
Under its share repurchase program, the Company repurchased
approximately 1,263,000 shares of common stock for
$57.4 million in 2008 to offset the dilutive effect of
shares granted as equity-based compensation. The Company did not
repurchase shares in 2009.
The high and low sales prices of the Companys common stock
on the New York Stock Exchange composite tape and the quarterly
dividends per share paid on the common stock were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid per share
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
Common stock trading range:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
33.36
|
|
|
$
|
35.78
|
|
|
$
|
38.63
|
|
|
$
|
39.79
|
|
Low
|
|
$
|
24.54
|
|
|
$
|
29.42
|
|
|
$
|
30.25
|
|
|
$
|
33.26
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid per share
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
Common stock trading range:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
46.95
|
|
|
$
|
53.12
|
|
|
$
|
52.50
|
|
|
$
|
41.24
|
|
Low
|
|
$
|
37.09
|
|
|
$
|
43.80
|
|
|
$
|
37.74
|
|
|
$
|
27.32
|
|
Securities Authorized for Issuance Under Equity Compensation
Plan Information
The following table sets forth information as of
December 31, 2009 regarding all of the Companys
existing compensation plans pursuant to which equity securities
are authorized for issuance to employees and nonemployee
directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities
|
|
|
|
Number of securities
|
|
|
|
|
|
remaining available
|
|
|
|
to be issued
|
|
|
Weighted average
|
|
|
for future issuance
|
|
|
|
upon exercise of
|
|
|
exercise price of
|
|
|
under equity
|
|
|
|
outstanding options,
|
|
|
outstanding options,
|
|
|
compensation plans
|
|
|
|
warrants
|
|
|
warrants
|
|
|
(excluding securities
|
|
|
|
and rights
|
|
|
and rights
|
|
|
reflected in column (a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
4,405,521
|
|
|
$
|
31.56
|
|
|
|
2,464,592
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,405,521
|
|
|
$
|
31.56
|
|
|
|
2,464,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Stock
Performance Graph
The following stock performance graph and related information
shall not be deemed soliciting material or to be
filed with the Securities and Exchange Commission,
nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933 or Securities
Exchange Act of 1934, each as amended, except to the extent that
the Company specifically incorporates it by reference into such
filing.
The following graph and accompanying table compare the
cumulative total shareholder return for AMETEK, Inc. over the
last five years ended December 31, 2009 with total returns
for the same period for the Russell 1000 Index and the Dow Jones
U.S. Electronic Equipment Index. The performance graph and
table assume a $100 investment made on December 31, 2004
and reinvestment of all dividends. The stock performance shown
on the graph below is based on historical data and is not
necessarily indicative of future stock price performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
AMETEK, Inc.
|
|
$
|
100.00
|
|
|
$
|
119.96
|
|
|
$
|
135.49
|
|
|
$
|
200.54
|
|
|
$
|
130.09
|
|
|
$
|
165.84
|
|
Russell 1000 Index*
|
|
|
100.00
|
|
|
|
106.27
|
|
|
|
122.70
|
|
|
|
129.78
|
|
|
|
80.99
|
|
|
|
104.01
|
|
Dow Jones U.S. Electronic Equipment Index*
|
|
|
100.00
|
|
|
|
107.66
|
|
|
|
124.17
|
|
|
|
145.71
|
|
|
|
85.54
|
|
|
|
123.00
|
|
18
|
|
Item 6.
|
Selected
Financial Data
|
The following financial information for the five years ended
December 31, 2009, has been derived from the Companys
consolidated financial statements. This information should be
read in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations and
the consolidated financial statements and related notes thereto
included elsewhere in this
Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In millions, except per share amounts)
|
|
|
Consolidated Operating Results
(Year Ended December 31):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
2,098.4
|
|
|
$
|
2,531.1
|
|
|
$
|
2,136.9
|
|
|
$
|
1,819.3
|
|
|
$
|
1,434.5
|
|
Operating income(1)
|
|
$
|
366.1
|
|
|
$
|
432.7
|
|
|
$
|
386.6
|
|
|
$
|
309.0
|
|
|
$
|
233.5
|
|
Interest expense
|
|
$
|
(68.8
|
)
|
|
$
|
(63.7
|
)
|
|
$
|
(46.9
|
)
|
|
$
|
(42.2
|
)
|
|
$
|
(32.9
|
)
|
Net income(1)
|
|
$
|
205.8
|
|
|
$
|
247.0
|
|
|
$
|
228.0
|
|
|
$
|
181.9
|
|
|
$
|
136.4
|
|
Earnings per share(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.93
|
|
|
$
|
2.33
|
|
|
$
|
2.15
|
|
|
$
|
1.74
|
|
|
$
|
1.31
|
|
Diluted
|
|
$
|
1.91
|
|
|
$
|
2.30
|
|
|
$
|
2.12
|
|
|
$
|
1.71
|
|
|
$
|
1.29
|
|
Dividends declared and paid per share
|
|
$
|
0.24
|
|
|
$
|
0.24
|
|
|
$
|
0.24
|
|
|
$
|
0.18
|
|
|
$
|
0.16
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
106.8
|
|
|
|
106.1
|
|
|
|
105.8
|
|
|
|
104.8
|
|
|
|
103.7
|
|
Diluted
|
|
|
107.9
|
|
|
|
107.4
|
|
|
|
107.6
|
|
|
|
106.6
|
|
|
|
105.6
|
|
Performance Measures and Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income Return on sales(1)
|
|
|
17.4
|
%
|
|
|
17.1
|
%
|
|
|
18.1
|
%
|
|
|
17.0
|
%
|
|
|
16.3
|
%
|
Return on average total assets(1)
|
|
|
11.6
|
%
|
|
|
14.9
|
%
|
|
|
15.9
|
%
|
|
|
15.8
|
%
|
|
|
14.6
|
%
|
Net income Return on average total capital(1)(5)
|
|
|
8.2
|
%
|
|
|
10.9
|
%
|
|
|
12.0
|
%
|
|
|
11.8
|
%
|
|
|
10.7
|
%
|
Return on average stockholders equity(1)(5)
|
|
|
14.4
|
%
|
|
|
19.5
|
%
|
|
|
20.7
|
%
|
|
|
20.5
|
%
|
|
|
18.5
|
%
|
EBITDA(1)(2)
|
|
$
|
428.0
|
|
|
$
|
489.4
|
|
|
$
|
433.9
|
|
|
$
|
351.4
|
|
|
$
|
269.9
|
|
Ratio of EBITDA to interest expense(1)(2)
|
|
|
6.3
|
x
|
|
|
7.7
|
x
|
|
|
9.3
|
x
|
|
|
8.3
|
x
|
|
|
8.2
|
x
|
Depreciation and amortization
|
|
$
|
65.5
|
|
|
$
|
63.3
|
|
|
$
|
52.7
|
|
|
$
|
45.9
|
|
|
$
|
39.4
|
|
Capital expenditures
|
|
$
|
33.1
|
|
|
$
|
44.2
|
|
|
$
|
37.6
|
|
|
$
|
29.2
|
|
|
$
|
23.3
|
|
Cash provided by operating activities
|
|
$
|
364.7
|
|
|
$
|
247.3
|
|
|
$
|
278.5
|
|
|
$
|
226.0
|
|
|
$
|
155.7
|
|
Free cash flow(3)
|
|
$
|
331.6
|
|
|
$
|
203.1
|
|
|
$
|
240.9
|
|
|
$
|
196.8
|
|
|
$
|
132.4
|
|
Ratio of earnings to fixed charges(6)
|
|
|
4.8
|
x
|
|
|
6.1
|
x
|
|
|
7.3
|
x
|
|
|
6.6
|
x
|
|
|
6.2
|
x
|
Consolidated Financial Position
(At December 31):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
969.4
|
|
|
$
|
954.6
|
|
|
$
|
952.2
|
|
|
$
|
684.1
|
|
|
$
|
556.3
|
|
Current liabilities
|
|
$
|
424.3
|
|
|
$
|
447.5
|
|
|
$
|
640.8
|
|
|
$
|
480.9
|
|
|
$
|
405.8
|
|
Property, plant and equipment, net
|
|
$
|
310.1
|
|
|
$
|
307.9
|
|
|
$
|
293.1
|
|
|
$
|
258.0
|
|
|
$
|
228.5
|
|
Total assets
|
|
$
|
3,246.0
|
|
|
$
|
3,055.5
|
|
|
$
|
2,745.7
|
|
|
$
|
2,130.9
|
|
|
$
|
1,780.6
|
|
Long-term debt
|
|
$
|
955.9
|
|
|
$
|
1,093.2
|
|
|
$
|
667.0
|
|
|
$
|
518.3
|
|
|
$
|
475.3
|
|
Total debt
|
|
$
|
1,041.7
|
|
|
$
|
1,111.7
|
|
|
$
|
903.0
|
|
|
$
|
681.9
|
|
|
$
|
631.4
|
|
Stockholders equity(5)
|
|
$
|
1,567.0
|
|
|
$
|
1,287.8
|
|
|
$
|
1,240.7
|
|
|
$
|
966.7
|
|
|
$
|
809.5
|
|
Stockholders equity per share(5)
|
|
$
|
14.53
|
|
|
$
|
12.07
|
|
|
$
|
11.56
|
|
|
$
|
9.11
|
|
|
$
|
7.66
|
|
Total debt as a percentage of capitalization(5)
|
|
|
39.9
|
%
|
|
|
46.3
|
%
|
|
|
42.1
|
%
|
|
|
41.4
|
%
|
|
|
43.8
|
%
|
Net debt as a percentage of capitalization(4)(5)
|
|
|
33.7
|
%
|
|
|
44.3
|
%
|
|
|
37.1
|
%
|
|
|
39.6
|
%
|
|
|
42.4
|
%
|
See Notes to Selected Financial Data on page 20.
19
Notes to
Selected Financial Data
|
|
|
(1)
|
|
Amounts for 2005 reflect the
retrospective application of Financial Accounting Standards
Board (FASB) Accounting Standards Codification
(ASC) Compensation Stock Compensation
Topic 718, (ASC 718) to expense stock options. The
adoption of ASC 718 reduced operating income, net income and
diluted earnings per share by the following amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction of Amounts Originally Reported:
|
|
|
|
|
|
|
Diluted Earnings
|
Impact of Adopting ASC 718
|
|
Operating Income
|
|
Net Income
|
|
Per Share
|
|
|
(In millions, except per share amounts)
|
|
2005
|
|
$
|
5.9
|
|
|
$
|
4.3
|
|
|
$
|
0.04
|
|
|
|
|
(2)
|
|
EBITDA represents income before
interest, income taxes, depreciation and amortization. EBITDA is
presented because the Company is aware that it is used by rating
agencies, securities analysts, investors and other parties in
evaluating the Company. It should not be considered, however, as
an alternative to operating income as an indicator of the
Companys operating performance or as an alternative to
cash flows as a measure of the Companys overall liquidity
as presented in the Companys consolidated financial
statements. Furthermore, EBITDA measures shown for the Company
may not be comparable to similarly titled measures used by other
companies. The following table presents the reconciliation of
net income reported in accordance with U.S. generally accepted
accounting principles (GAAP) to EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In millions)
|
|
|
Net income
|
|
$
|
205.8
|
|
|
$
|
247.0
|
|
|
$
|
228.0
|
|
|
$
|
181.9
|
|
|
$
|
136.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add (deduct):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
68.8
|
|
|
|
63.7
|
|
|
|
46.9
|
|
|
|
42.2
|
|
|
|
32.9
|
|
Interest income
|
|
|
(1.0
|
)
|
|
|
(3.9
|
)
|
|
|
(2.1
|
)
|
|
|
(0.4
|
)
|
|
|
(0.7
|
)
|
Income taxes
|
|
|
88.9
|
|
|
|
119.3
|
|
|
|
108.4
|
|
|
|
81.8
|
|
|
|
61.9
|
|
Depreciation
|
|
|
42.2
|
|
|
|
45.8
|
|
|
|
42.3
|
|
|
|
38.9
|
|
|
|
35.0
|
|
Amortization
|
|
|
23.3
|
|
|
|
17.5
|
|
|
|
10.4
|
|
|
|
7.0
|
|
|
|
4.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
222.2
|
|
|
|
242.4
|
|
|
|
205.9
|
|
|
|
169.5
|
|
|
|
133.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
428.0
|
|
|
$
|
489.4
|
|
|
$
|
433.9
|
|
|
$
|
351.4
|
|
|
$
|
269.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
Free cash flow represents cash flow
from operating activities less capital expenditures. Free cash
flow is presented because the Company is aware that it is used
by rating agencies, securities analysts, investors and other
parties in evaluating the Company. (Also see note 2 above).
The following table presents the reconciliation of cash flow
from operating activities reported in accordance with U.S. GAAP
to free cash flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In millions)
|
|
|
Cash provided by operating activities
|
|
$
|
364.7
|
|
|
$
|
247.3
|
|
|
$
|
278.5
|
|
|
$
|
226.0
|
|
|
$
|
155.7
|
|
Deduct: Capital expenditures
|
|
|
(33.1
|
)
|
|
|
(44.2
|
)
|
|
|
(37.6
|
)
|
|
|
(29.2
|
)
|
|
|
(23.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow
|
|
$
|
331.6
|
|
|
$
|
203.1
|
|
|
$
|
240.9
|
|
|
$
|
196.8
|
|
|
$
|
132.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
|
|
Net debt represents total debt
minus cash and cash equivalents. Net debt is presented because
the Company is aware that it is used by securities analysts,
investors and other parties in evaluating the Company. (Also see
note 2 above). The following table presents the
reconciliation of total debt in accordance with U.S. GAAP to net
debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In millions)
|
|
|
Total debt
|
|
$
|
1,041.7
|
|
|
$
|
1,111.7
|
|
|
$
|
903.0
|
|
|
$
|
681.9
|
|
|
$
|
631.4
|
|
Less: Cash and cash equivalents
|
|
|
(246.4
|
)
|
|
|
(87.0
|
)
|
|
|
(170.1
|
)
|
|
|
(49.1
|
)
|
|
|
(35.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt
|
|
|
795.3
|
|
|
|
1,024.7
|
|
|
|
732.9
|
|
|
|
632.8
|
|
|
|
595.9
|
|
Stockholders equity
|
|
|
1,567.0
|
|
|
|
1,287.8
|
|
|
|
1,240.7
|
|
|
|
966.7
|
|
|
|
809.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization (net debt plus stockholders equity)
|
|
$
|
2,362.3
|
|
|
$
|
2,312.5
|
|
|
$
|
1,973.6
|
|
|
$
|
1,599.5
|
|
|
$
|
1,405.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt as a percentage of capitalization
|
|
|
33.7
|
%
|
|
|
44.3
|
%
|
|
|
37.1
|
%
|
|
|
39.6
|
%
|
|
|
42.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
|
The adoption of certain provisions
in FASB ASC Compensation Retirement Benefits Topic
715, for our defined benefit pension plans, which were effective
December 31, 2006, resulted in a reduction of
$32.7 million to stockholders equity. The adoption of
provisions in FASB ASC Income Taxes Topic 740, as of
January 1, 2007, resulted in a $5.9 million charge to
the opening balance of stockholders equity.
|
|
(6)
|
|
Penalties and interest accrued
related to unrecognized tax benefits are recognized in income
tax expense. Refer to Exhibit 12 for the calculation of the
ratio of earnings to fixed charges.
|
20
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
This report includes forward-looking statements based on the
Companys current assumptions, expectations and projections
about future events. When used in this report, the words
believes, anticipates, may,
expect, intend, estimate,
project and similar expressions are intended to
identify forward-looking statements, although not all
forward-looking statements contain such words. In this report,
the Company discloses important factors that could cause actual
results to differ materially from managements
expectations. For more information on these and other factors,
see Forward-Looking Information herein.
The following Managements Discussion and Analysis of
Financial Condition and Results of Operations
(MD&A) should be read in conjunction with
Item 1A. Risk Factors, Item 6.
Selected Financial Data and the consolidated financial
statements and related notes included elsewhere in this
Form 10-K.
Business
Overview
As a global business, AMETEKs operations are affected by
global, regional and industry economic factors. However, the
Companys strategic geographic and industry
diversification, and its mix of products and services, have
helped to limit the potential adverse impact of any unfavorable
developments in any one industry or the economy of any single
country on its consolidated operating results. Beginning in the
fourth quarter of 2008 and throughout most of 2009, the Company
experienced lower order rates as a result of the global economic
recession. However, order rates stabilized in the third quarter
of 2009 and began to increase in the fourth quarter of 2009. In
2009, the Company posted solid sales, operating income, net
income and diluted earnings per share given the global economic
recession. The impact of contributions from recent acquisitions
combined with successful Operational Excellence initiatives had
a positive impact on 2009 results. The Company also benefited
from its strategic initiatives under AMETEKs four growth
strategies: Operational Excellence, New Product Development,
Global and Market Expansion and Strategic Acquisitions and
Alliances. Highlights of 2009 were:
|
|
|
|
|
During 2009, the Company completed the following acquisitions:
|
|
|
|
|
|
In January 2009, the Company acquired High Standard Aviation.
High Standard Aviation is a provider of electrical and
electromechanical, hydraulic and pneumatic repair services to
the aerospace industry.
|
|
|
|
In September 2009, the Company completed a small acquisition of
two businesses in India, Unispec Marketing Pvt. Ltd. and Thelsha
Technical Services Pvt. Ltd. This acquisition provides the
Company with an established sales, distribution and service
network in India serving the quality control and analytical
instrumentation market.
|
|
|
|
In December 2009, the Company acquired Ameron Global, a
manufacturer of highly engineered pressurized gas components and
systems for commercial and aerospace customers. Ameron Global is
also a leader in maintenance, repair and overhaul of fire
suppression and oxygen supply systems
|
|
|
|
|
|
The Company continues to maintain a strong international sales
presence. International sales, including U.S. export sales,
were $1,031.7 million or 49.2% of consolidated sales in
2009, compared with $1,225.5 million or 48.4% of
consolidated sales in 2008.
|
|
|
|
The Company continued its emphasis on investment in research,
development and engineering, spending $101.4 million in
2009 before customer reimbursement of $5.5 million. Sales
from products introduced in the last three years were
$394.0 million or 18.8% of sales.
|
|
|
|
In 2009, the Company paid in full a 40 million British
pound ($62.0 million) borrowing under the revolving credit
facility in the second quarter and a 10.5 million British
pound ($16.9 million) floating-rate term note in the fourth
quarter.
|
|
|
|
As a result of the 2009 and 2008 Operational Excellence
initiatives, which included initiatives associated with the
2008 year end restructuring, the Company achieved
$135 million in cost savings in 2009. The 2008 year
end restructuring included pre-tax charges totaling
$40.0 million, which had the effect of reducing net income
by $27.3 million ($0.25 per diluted share). These charges
include restructuring costs for employee reductions and facility
closures ($32.6 million), as well as asset write-downs
($7.4 million).
|
21
Results
of Operations
The following table sets forth net sales and income by
reportable segment and on a consolidated basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net sales(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Instruments
|
|
$
|
1,146,578
|
|
|
$
|
1,402,653
|
|
|
$
|
1,199,757
|
|
Electromechanical
|
|
|
951,777
|
|
|
|
1,128,482
|
|
|
|
937,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net sales
|
|
$
|
2,098,355
|
|
|
$
|
2,531,135
|
|
|
$
|
2,136,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income and income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Instruments
|
|
$
|
232,875
|
|
|
$
|
306,764
|
|
|
$
|
260,338
|
|
Electromechanical
|
|
|
166,582
|
|
|
|
175,181
|
|
|
|
167,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating income
|
|
|
399,457
|
|
|
|
481,945
|
|
|
|
427,504
|
|
Corporate administrative and other expenses
|
|
|
(33,407
|
)
|
|
|
(49,291
|
)
|
|
|
(40,930
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating income
|
|
|
366,050
|
|
|
|
432,654
|
|
|
|
386,574
|
|
Interest and other expenses, net
|
|
|
(71,417
|
)
|
|
|
(66,438
|
)
|
|
|
(50,130
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated income before income taxes
|
|
$
|
294,633
|
|
|
$
|
366,216
|
|
|
$
|
336,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
After elimination of intra- and intersegment sales, which are
not significant in amount. |
|
(2) |
|
Segment operating income represents sales less all direct costs
and expenses (including certain administrative and other
expenses) applicable to each segment, but does not include
interest expense. |
Year
Ended December 31, 2009 Compared with Year Ended
December 31, 2008
Results
of Operations
In 2009, the Company posted solid sales, operating income, net
income, diluted earnings per share and cash flow given the
global economic recession. The Companys results include
contributions from acquisitions completed in 2009 and the
acquisitions of Motion Control Group (MCG), Drake
Air (Drake) and Newage Testing Instruments in
February 2008, Reading Alloys in April 2008, Vision Research,
Inc. in June 2008, the programmable power business of Xantrex
Technology, Inc. (Xantrex Programmable) in August
2008 and Muirhead Aerospace Limited (Muirhead) in
November 2008. The Company believes the impact of the global
economic recession stabilized in the third quarter of 2009, with
increased operating results in the fourth quarter of 2009 in
most of its markets when compared to the previous quarters of
2009, and expects operating results in 2010 to show further
moderate improvement. The full year impact of the 2009
acquisitions and our Operational Excellence capabilities should
have a positive impact on our 2010 results.
Net sales for 2009 were $2,098.4 million, a decrease of
$432.7 million or 17.1% when compared with net sales of
$2,531.1 million in 2008. Net sales for Electronic
Instruments Group (EIG) were $1,146.6 million
in 2009, a decrease of 18.3% from sales of $1,402.7 million
in 2008. Net sales for Electromechanical Group (EMG)
were $951.8 million in 2009, a decrease of 15.7% from sales
of $1,128.5 million in 2008. The decline in net sales was
primarily attributable to lower order rates as a result of the
global economic recession, partially offset by the impact of the
acquisitions mentioned above. The Companys internal sales
declined approximately 21% in 2009, which excludes a 2%
unfavorable effect of foreign currency translation. The
acquisitions mentioned above offset approximately 6% of the
Companys internal sales decline.
Total international sales for 2009 were $1,031.7 million or
49.2% of consolidated net sales, a decrease of
$193.8 million or 15.8% when compared with international
sales of $1,225.5 million or 48.4% of consolidated net
sales in 2008. The decline in international sales resulted from
decreased international sales from base businesses of
22
$272.5 million, which includes the effect of foreign
currency translation, partially offset by the impact of the
acquisitions completed in 2009 and 2008. The Company maintains a
strong international sales presence in Europe and Asia by both
reportable segments. Export shipments from the United States,
which are included in total international sales, were
$400.6 million in 2009, a decrease of $77.9 million or
16.3% compared with $478.5 million in 2008. Export
shipments declined primarily due to decreased exports from the
base businesses, partially offset by the acquisitions noted
above.
New orders for 2009 were $2,028.1 million, a decrease of
$533.4 million or 20.8% when compared with
$2,561.5 million in 2008. Throughout most of 2009, the
Company experienced lower order rates as a result of the global
economic recession. However, order rates stabilized in the third
quarter of 2009 and began to increase in the fourth quarter of
2009. As a result, the Companys backlog of unfilled orders
at December 31, 2009 was $648.4 million, a decrease of
$70.2 million or 9.8% when compared with
$718.6 million at December 31, 2008.
Segment operating income for 2009 was $399.5 million, a
decrease of $82.4 million or 17.1% when compared with
segment operating income of $481.9 million in 2008. Segment
operating income, as a percentage of sales, was 19.0% in both
2009 and 2008. The decrease in segment operating income resulted
primarily from the decrease in sales noted above and higher
defined benefit pension expense, partially offset by profit
contributions made by the acquisitions and cost reduction
initiatives, including $135 million of cost savings
achieved in 2009 primarily from the restructuring activities
related to the fourth quarter of 2008 restructuring charges. As
a result of defined benefit pension plan contributions in 2009
and 2008, as well as overall stock market performance in 2009,
the Company expects defined benefit pension expense to be lower
in 2010.
Selling, general and administrative (SG&A)
expenses for 2009 were $254.1 million, a decrease of
$68.5 million or 21.2% when compared with
$322.6 million in 2008. As a percentage of sales, SG&A
expenses were 12.1% for 2009, compared with 12.7% in 2008. The
decrease in SG&A expenses was primarily the result of lower
sales and the Companys cost savings initiatives.
Additionally, 2008 SG&A expenses includes both a
$7.1 million charge, recorded in corporate administrative
expenses, related to the accelerated vesting of an April 2005
restricted stock grant in the second quarter of 2008 and
$7.1 million of SG&A expense related to fourth quarter
of 2008 restructuring charges and asset write-downs. Base
business selling expenses decreased approximately 22%, which was
in line with the Companys 2009 sales decline. Selling
expenses, as a percentage of sales, decreased to 10.5% for 2009,
compared with 10.8% in 2008 due to the previously mentioned cost
savings initiatives.
Corporate administrative expenses for 2009 were
$33.2 million, a decrease of $16.0 million or 32.5%
when compared with $49.2 million in 2008. As a percentage
of sales, corporate administrative expenses were 1.6% for 2009,
compared with 1.9% in 2008. The decrease in corporate
administrative expenses was driven by the equity-based
compensation associated with the accelerated vesting of
restricted stock in the second quarter of 2008, lower short-term
incentive compensation in 2009 and the Companys cost
saving initiatives, including the restructuring activities,
noted above.
Consolidated operating income was $366.1 million or 17.4%
of sales for 2009, a decrease of $66.6 million or 15.4%
when compared with $432.7 million or 17.1% of sales in 2008.
Interest expense was $68.8 million for 2009, an increase of
$5.1 million or 8.0% when compared with $63.7 million
in 2008. The increase was due to the full-year impact of the
funding of the long-term private placement senior notes in the
third and fourth quarters of 2008, partially offset by the
repayment of 40 million British-pound-denominated debt
under the revolver in the second quarter of 2009.
The effective tax rate for 2009 was 30.2% compared with 32.6% in
2008. The lower effective tax rate for 2009 primarily reflects
the impact of settlements of income tax examinations and
benefits obtained from state and international income tax
planning initiatives. The higher effective tax rate for 2008
primarily reflects an increase in state and foreign income taxes
and the impact of accelerated vesting of non-deductible
restricted stock amortization, offset by the impact of
settlements of various income tax issues with U.S. taxing
authorities and a favorable agreement in the United Kingdom
related to deductible interest expense for which previously
unrecognized tax benefits were recognized. See Note 13 of
the notes to consolidated financial statements included in this
Form 10-K
for further details.
23
Net income for 2009 was $205.8 million, a decrease of
$41.2 million or 16.7% when compared with
$247.0 million in 2008. Diluted earnings per share for 2009
was $1.91, a decrease of $0.39 or 17.0% when compared with $2.30
per diluted share in 2008. Diluted earnings per share for 2008
includes the impact of the fourth quarter of 2008 restructuring
charges and asset write-downs, which negatively impacted
earnings by $0.25 per diluted share.
Segment
Results
EIGs sales totaled $1,146.6 million for 2009,
a decrease of $256.1 million or 18.3% when compared with
$1,402.7 million in 2008. The sales decrease was due to an
internal sales decline of approximately 20%, excluding an
unfavorable 2% effect of foreign currency translation, driven
primarily by EIGs process and industrial products
businesses. Partially offsetting the sales decrease was the 2008
acquisitions of Vision Research, Inc. and Xantrex Programmable.
EIGs operating income was $232.9 million for 2009, a
decrease of $73.9 million or 24.1% when compared with
$306.8 million in 2008. EIGs operating margins were
20.3% of sales for 2009 compared with 21.9% of sales in 2008.
The decrease in segment operating income and operating margins
was driven by the decrease in sales noted above, predominantly
by weakness in the aerospace aftermarket, process and industrial
businesses and higher defined benefit pension expense, which was
partially offset by the cost savings achieved from the
restructuring activities related to the fourth quarter of 2008
restructuring charges. The fourth quarter of 2008 restructuring
charges and asset write-downs of $20.4 million had a
negative impact on EIGs operating margins of
140 basis points.
EMGs sales totaled $951.8 million for 2009, a
decrease of $176.7 million or 15.7% from
$1,128.5 million in 2008. The sales decrease was due to an
internal sales decline of approximately 21%, excluding an
unfavorable 3% effect of foreign currency translation, driven
primarily by the engineered materials, interconnects and
packaging products (EMIP) and cost driven motors
businesses. Partially offsetting the sales decrease was the 2009
acquisition of High Standard Aviation and the 2008 acquisitions
of Drake, MCG, Reading Alloys and Muirhead.
EMGs operating income was $166.6 million for 2009, a
decrease of $8.6 million or 4.9% when compared with
$175.2 million in 2008. EMGs decrease in operating
income was driven by the decrease in sales noted above,
predominantly by weakness in the EMIP businesses, which was
partially offset by profit contributions made by the
acquisitions mentioned above and the fourth quarter of 2008
restructuring charges and asset write-downs of
$19.4 million. EMGs operating margins were 17.5% of
sales for 2009 compared with 15.5% of sales in 2008. The
increase in operating margins was primarily driven by
Operational Excellence capabilities and cost reduction
initiatives throughout the Group, including the cost savings
achieved from the restructuring activities related to the fourth
quarter of 2008 restructuring charges and asset write-downs. The
fourth quarter of 2008 restructuring charges and asset
write-downs of $19.4 million had a negative impact on
operating margins of 170 basis points.
Fourth
Quarter Results
Net sales for the fourth quarter of 2009 were
$523.5 million, a decrease of $100.2 million or 16.1%
when compared with net sales of $623.7 million for the
fourth quarter of 2008. Net sales for EIG were
$286.0 million in 2009, a decrease of 20.9% from sales of
$361.6 million in 2008. Net sales for EMG were
$237.5 million in 2009, a decrease of 9.4% from sales of
$262.1 million in 2008. The Companys internal sales
decline was approximately 20%, which excludes a 2% favorable
effect of foreign currency translation. The acquisitions
mentioned above offset approximately 2% of the Companys
internal sales decline.
The three months ended December 31, 2008 results include
pre-tax charges totaling $40.0 million, which had the
effect of reducing net income by $27.3 million ($0.25 per
diluted share). These charges include restructuring costs for
employee reductions and facility closures ($32.6 million),
as well as asset write-downs ($7.4 million). Of the
$40.0 million in charges, $32.9 million of the
restructuring charges and asset write-downs were recorded in
cost of sales and $7.1 million of the restructuring charges
and asset write-downs were recorded in SG&A expenses. The
restructuring charges and asset write-downs were reported in
segment operating income as follows: $20.4 million in EIG,
$19.4 million in EMG and $0.2 million in Corporate
administrative and other expenses. The restructuring costs for
employee reductions and facility closures relate to plans
established by the Company as part of cost
24
reduction initiatives that were broadly implemented across the
Companys various businesses during fiscal 2009. The
restructuring costs include the consolidation of manufacturing
facilities, the migration of production to low cost locales and
a general reduction in workforce in response to lower levels of
expected sales volumes in certain of the Companys
businesses. The Company recorded pre-tax charges of
$30.1 million for severance costs for more than 10% of the
Companys workforce. The Company also recorded pre-tax
charges of $1.5 million for lease termination costs
associated with the closure of certain facilities in 2009. See
Note 5 of the notes to consolidated financial statements
included in this
Form 10-K
for further details.
Net income for the fourth quarter of 2009 was
$51.9 million, an increase of $8.1 million or 18.5%
when compared with $43.8 million for the fourth quarter of
2008. Diluted earnings per share in the fourth quarter of 2009
was $0.48, an increase of $0.07 or 17.1% when compared with
$0.41 per diluted share in the fourth quarter of 2008. Diluted
earnings per share includes the impact of the fourth quarter of
2008 restructuring charges and asset write-downs, which
negatively impacted earnings by $0.25 per diluted share.
Year
Ended December 31, 2008 Compared with Year Ended
December 31, 2007
Results
of Operations
In 2008, the Company posted record sales, operating income, net
income and diluted earnings per share. The Company achieved
these results from contributions from acquisitions completed in
2008 and 2007, as well as internal growth in both EIG and EMG.
Operating income increased, driven by the record sales and a
continued focus on cost reduction programs under our Operational
Excellence initiatives.
Net sales for 2008 were $2,531.1 million, an increase of
$394.2 million or 18.4% when compared with net sales of
$2,136.9 million in 2007. Net sales for EIG were
$1,402.7 million in 2008, an increase of 16.9% from sales
of $1,199.8 million in 2007. Net sales for EMG were
$1,128.5 million in 2008, an increase of 20.4% from sales
of $937.1 million in 2007. The Companys internal
sales growth was approximately 4% in 2008, which excludes a 1%
favorable effect of foreign currency translation, driven by
strength in its differentiated businesses. The acquisitions
mentioned above contributed the remainder of the net sales
increase.
Total international sales for 2008 were $1,225.5 million or
48.4% of consolidated net sales, an increase of
$171.8 million or 16.3% when compared with international
sales of $1,053.7 million or 49.3% of consolidated net
sales in 2007. The increase in international sales resulted from
increased international sales from base businesses of
$29.3 million or 17.0% of the increase, which includes the
effect of foreign currency translation, as well as the
acquisitions completed in 2008 and 2007, most notably Cameca SAS
(Cameca), the Repair & Overhaul Division
of Umeco plc (Umeco R&O), Reading Alloys,
California Instruments Corporation (California
Instruments) and Vision Research. Increased international
sales came primarily from sales to Europe and Asia by both
reportable segments. Export shipments from the United States,
which are included in total international sales, were
$478.5 million in 2008, an increase of $84.1 million
or 21.3% compared with $394.4 million in 2007. Export
shipments improved primarily due to increased exports from the
base businesses and the acquisitions noted above.
New orders for 2008 were a record at $2,561.5 million, an
increase of $273.2 million or 11.9% when compared with
$2,288.3 million in 2007. The increase in new orders was
primarily due to the recent acquisitions noted above. As a
result, the Companys backlog of unfilled orders at
December 31, 2008 was $718.6 million, an increase of
$30.4 million or 4.4% when compared with
$688.2 million at December 31, 2007. The increase in
backlog was primarily due to the acquired backlog of the recent
acquisitions noted above.
The year ended December 31, 2008 results include fourth
quarter pre-tax charges totaling $40.0 million, which had
the effect of reducing net income by $27.3 million ($0.25
per diluted share). These charges include restructuring costs
for employee reductions and facility closures
($32.6 million), as well as asset write-downs
($7.4 million). Of the $40.0 million in charges,
$32.9 million of the restructuring charges and asset
write-downs were recorded in cost of sales and $7.1 million
of the restructuring charges and asset write-downs were recorded
in SG&A expenses. The restructuring charges and asset
write-downs were reported in segment operating income as
follows: $20.4 million in EIG, $19.4 million in EMG
and $0.2 million in Corporate administrative and other
expenses. The restructuring costs for employee reductions and
facility closures relate to plans established by the Company as
part of cost reduction initiatives that were broadly implemented
across the Companys various businesses during fiscal 2009.
25
The restructuring costs include the consolidation of
manufacturing facilities, the migration of production to low
cost locales and a general reduction in workforce in response to
lower levels of expected sales volumes in certain of the
Companys businesses. The Company recorded pre-tax charges
of $30.1 million for severance costs for more than 10% of
the Companys workforce. The Company also recorded pre-tax
charges of $1.5 million for lease termination costs
associated with the closure of certain facilities in 2009.
Segment operating income for 2008 was $481.9 million, an
increase of $54.4 million or 12.7% when compared with
segment operating income of $427.5 million in 2007. Segment
operating income, as a percentage of sales, decreased to 19.0%
for 2008 from 20.0% in 2007. The increase in segment operating
income resulted primarily from strength in the Companys
differentiated businesses and profit contributions made by the
acquisitions, partially offset by the fourth quarter pre-tax
restructuring charges and asset write-downs described above. The
decrease in segment operating margins resulted primarily from
the restructuring charges and asset write-downs, which
negatively impacted segment operating margins by 160 basis
points.
SG&A expenses for 2008 were $322.6 million, an
increase of $59.1 million or 22.4% when compared with
$263.5 million in 2007. As a percentage of sales, SG&A
expenses were 12.7% for 2008, compared with 12.3% in 2007. The
increase in SG&A expenses was the result of higher sales,
as well as a $7.1 million charge representing a
0.3% increase in SG&A expenses recorded in
corporate administrative expenses related to the accelerated
vesting of an April 2005 restricted stock grant in the second
quarter of 2008 and $7.1 million of SG&A expense
related to the fourth quarter of 2008 restructuring charges and
asset write-downs described above. Additionally, the
Companys acquisition strategy generally is to acquire
differentiated businesses, which because of their distribution
channels and higher marketing costs tend to have a higher
content of selling expenses. Base business selling expenses
increased approximately 7.9%. Excluding the impact of the fourth
quarter restructuring charges and asset write-downs on selling
expense of $6.9 million, a 3.2% impact, and foreign
currency translation, the increase in 2008 base business selling
expenses was in line with internal sales growth. Selling
expenses, as a percentage of sales, increased to 10.8% for 2008,
compared with 10.4% in 2007.
Corporate administrative expenses for 2008 were
$49.2 million, an increase of $8.4 million or 20.6%
when compared with $40.8 million in 2007. As a percentage
of sales, corporate administrative expenses were 1.9%, in both
2008 and 2007. The increase in corporate administrative expenses
was primarily the result of equity-based compensation associated
with the accelerated vesting of restricted stock in the second
quarter of 2008, noted above, as well as other expenses
necessary to grow the Company, partially offset by equity-based
compensation associated with the accelerated vesting of
restricted stock in the first and third quarters of 2007.
Consolidated operating income was $432.7 million or 17.1%
of sales for 2008, an increase of $46.1 million or 11.9%
when compared with $386.6 million or 18.1% of sales in 2007.
Interest expense was $63.7 million for 2008, an increase of
$16.8 million or 35.8% when compared with
$46.9 million in 2007. The increase was due to the impact
of the funding of the private placement senior notes in the
fourth quarter of 2007 and the third and fourth quarters of
2008, higher average borrowings to fund the recent acquisitions
and the repurchase of 1.3 million shares of the
Companys common stock in 2008.
The effective tax rate for 2008 was 32.6% compared with 32.2% in
2007. The higher effective tax rate for 2008 primarily reflects
an increase in state and foreign income taxes and the impact of
accelerated vesting of non-deductible restricted stock
amortization, offset by the impact of settlements of various
income tax issues with U.S. taxing authorities and a
favorable agreement in the United Kingdom related to deductible
interest expense for which previously unrecognized tax benefits
were recognized. The lower effective tax rate in 2007 primarily
reflects an enacted decrease in certain foreign corporate tax
rates in the second half of 2007, partially offset by the
elimination of the Foreign Sales Corporation/Extraterritorial
Income (FSC/ETI) tax benefit.
Net income for 2008 was $247.0 million, an increase of
$19.0 million or 8.3% when compared with
$228.0 million in 2007. Diluted earnings per share for 2008
was $2.30, an increase of $0.18 or 8.5% when compared with $2.12
per diluted share in 2007. Diluted earnings per share for 2008
includes the impact of the fourth quarter of 2008 restructuring
charges and asset write-downs, which negatively impacted
earnings by $0.25 per diluted share.
26
Segment
Results
EIGs sales totaled $1,402.7 million for 2008,
an increase of $202.9 million or 16.9% when compared with
$1,199.8 million in 2007. The sales increase was due to
internal growth of approximately 5%, excluding a favorable 1%
effect of foreign currency translation, driven primarily by
EIGs aerospace, power, and process and analytical
instrument businesses. The acquisitions of Advanced Industries,
Inc., B&S Aircraft Parts and Accessories, Cameca,
California Instruments, Vision Research, Inc. and Xantrex
Programmable accounted for the remainder of the sales increase.
EIGs operating income was $306.8 million for 2008, an
increase of $46.5 million or 17.9% when compared with
$260.3 million in 2007. The increases in segment operating
income were due to the contribution from the higher sales by
EIGs aerospace, power and process and analytical
businesses, which includes the acquisitions mentioned above,
partially offset by the fourth quarter of 2008 restructuring
charges and asset write-downs of $20.4 million. EIGs
operating margins were 21.9% of sales for 2008 compared with
21.7% of sales in 2007. The increase in operating margins was
driven by operational excellence initiatives throughout the
group. The fourth quarter of 2008 restructuring charges and
asset write-downs had a negative impact on EIGs operating
margins of 140 basis points.
EMGs sales totaled $1,128.5 million for 2008,
an increase of $191.4 million or 20.4% from
$937.1 million in 2007. The sales increase was due to
internal growth of approximately 2%, excluding a favorable 1%
effect of foreign currency translation, driven primarily by
EMGs differentiated businesses. The acquisitions of Seacon
Phoenix, subsequently renamed AMETEK SCP, Inc., Hamilton
Precision Metals, Umeco R&O, Drake Air, MCG, Reading Alloys
and Muirhead accounted for the remainder of the sales increase.
EMGs operating income was $175.2 million for 2008, an
increase of $8.0 million or 4.8% when compared with
$167.2 million in 2007. EMGs increase in operating
income was primarily due to higher sales from the groups
differentiated businesses, which include the acquisitions
mentioned above, partially offset by the fourth quarter of 2008
restructuring charges and asset write-downs of
$19.4 million. EMGs operating margins were 15.5% of
sales for 2008 compared with 17.8% of sales in 2007. The
decrease in operating margins was primarily driven by the fourth
quarter of 2008 restructuring charges and asset write-downs,
which had a negative impact on operating margins of
170 basis points. The remainder of the decrease was the
dilutive impact of recent acquisitions.
Fourth
Quarter Results
Net sales for the fourth quarter of 2008 were
$623.7 million, an increase of $40.4 million or 6.9%
when compared with net sales of $583.3 million for the
fourth quarter of 2007. Net sales for EIG were
$361.6 million in 2008, an increase of 7.6% from sales of
$336.1 million in 2007. Net sales for EMG were
$262.1 million in 2008, an increase of 6.1% from sales of
$247.1 million in 2007. The Companys internal sales
growth was approximately negative 2%, which excludes a 4%
unfavorable effect of foreign currency translation. The
acquisitions mentioned above made up the net sales increase.
The three months ended December 31, 2008 results include
pre-tax charges totaling $40.0 million, which had the
effect of reducing net income by $27.3 million ($0.25 per
diluted share). These charges include restructuring costs for
employee reductions and facility closures ($32.6 million),
as well as asset write-downs ($7.4 million). Of the
$40.0 million in charges, $32.9 million of the
restructuring charges and asset write-downs were recorded in
cost of sales and $7.1 million of the restructuring charges
and asset write-downs were recorded in SG&A expenses. The
restructuring charges and asset write-downs were reported in
segment operating income as follows: $20.4 million in EIG,
$19.4 million in EMG and $0.2 million in Corporate
administrative and other expenses. The restructuring costs for
employee reductions and facility closures relate to plans
established by the Company as part of cost reduction initiatives
that were broadly implemented across the Companys various
businesses during fiscal 2009. The restructuring costs include
the consolidation of manufacturing facilities, the migration of
production to low cost locales and a general reduction in
workforce in response to lower levels of expected sales volumes
in certain of the Companys businesses. The Company
recorded pre-tax charges of $30.1 million for severance
costs for more than 10% of the Companys workforce. The
Company also recorded pre-tax charges of $1.5 million for
lease termination costs associated with the closure of certain
facilities in 2009.
27
Net income for the fourth quarter of 2008 was
$43.8 million, a decrease of $18.1 million or 29.2%
when compared with $61.9 million for the fourth quarter of
2007. Diluted earnings per share in the fourth quarter of 2008
was $0.41, a decrease of $0.16 or 28.1% when compared with $0.57
per diluted share in the fourth quarter of 2007. Diluted
earnings per share includes the impact of the fourth quarter of
2008 restructuring charges and asset write-downs, which
negatively impacted earnings by $0.25 per diluted share.
Liquidity
and Capital Resources
Cash provided by operating activities totaled
$364.7 million in 2009, an increase of $117.4 million
or 47.5% when compared with $247.3 million in 2008. The
increase in operating cash flow was primarily the result of
lower overall operating working capital levels, which includes
the impact of a tax refund received in 2009 that resulted from
the Companys higher year end 2008 defined benefit pension
contributions and $21.1 million in defined benefit pension
contributions paid in 2009, compared with $79.9 million in
defined benefit pension contributions paid in 2008. As a result
of the 2009 and 2008 defined benefit pension plan contributions,
as well as overall stock market performance in 2009, the
Companys overall defined benefit pension plans were over
funded at December 31, 2009. The increase in cash provided
by lower overall operating working capital was partially offset
by the $41.2 million decrease in net income. Free cash flow
(operating cash flow less capital spending) was
$331.6 million in 2009, compared to $203.1 million in
2008. EBITDA (earnings before interest, income taxes,
depreciation and amortization) was $428.0 million in 2009,
compared with $489.4 million in 2008, which includes the
fourth quarter of 2008 pre-tax restructuring charges and asset
write-downs of $40.0 million. Free cash flow and EBITDA are
presented because the Company is aware that they are measures
used by third parties in evaluating the Company. (See the
Notes to Selected Financial Data included in
Item 6 for a reconciliation of U.S. generally accepted
accounting principles (GAAP) measures to comparable
non-GAAP measures).
Cash used for investing activities totaled $106.3 million
in 2009, compared with $496.6 million in 2008. In 2009, the
Company paid $72.9 million for three business acquisitions,
net of cash received, compared with $463.0 million paid for
six business acquisitions and one technology line acquisition,
net of cash received, in 2008. Additions to property, plant and
equipment totaled $33.1 million in 2009, compared with
$44.2 million in 2008.
Cash used for financing activities totaled $102.5 million
in 2009, compared with $173.5 million of cash provided by
financing activities in 2008. In 2009, net total borrowings
decreased by $92.4 million, compared with a net total
borrowings increase of $266.9 million in 2008. Short-term
borrowings decreased $13.0 million in 2009, compared with
an increase of $69.7 million in 2008. Long-term borrowings
decreased $79.4 million in 2009, compared to an increase of
$197.2 million in 2008.
During the second quarter of 2009, the Company paid in full a
40 million British pound ($62.0 million) borrowing
under the revolving credit facility. During the fourth quarter
of 2009, the Company paid in full a 10.5 million British
pound ($16.9 million) floating-rate term note.
In May 2009, the Company chose not to renew its
$100 million accounts receivable securitization facility.
There were no borrowings under this facility at
December 31, 2008.
In July 2008, the Company paid in full the $225 million
7.20% senior notes due July 2008 using the proceeds from
borrowings under its existing revolving credit facility.
The second funding of the third quarter of 2007 private
placement agreement to sell $450 million occurred in July
2008 for $80 million in aggregate principal amount of
6.35% senior notes due July 2018. The 2007 private
placement carries a weighted average interest rate of 6.25%. The
proceeds from the second funding of the notes were used to pay
down a portion of the borrowings outstanding under the
Companys revolving credit facility.
In the third quarter of 2008, the Company completed a private
placement agreement to sell $350 million in senior notes to
a group of institutional investors. There were two funding dates
for the senior notes. The first funding occurred in September
2008 for $250 million, consisting of $90 million in
aggregate principal amount of 6.59% senior notes due
September 2015 and $160 million in aggregate principal
amount of 7.08% senior notes due September 2018. The second
funding date occurred in December 2008 for $100 million,
consisting of $35 million in aggregate principal amount of
6.69% senior notes due December 2015 and $65 million
in aggregate principal amount of 7.18% senior notes due
December 2018. The senior notes carry a weighted average
interest rate
28
of 6.93%. The senior notes are subject to certain customary
covenants, including financial covenants that, among other
things, require the Company to maintain certain
debt-to-EBITDA
and interest coverage ratios. The proceeds from the senior notes
were used to pay down a portion of the borrowings outstanding
under the Companys revolving credit facility.
The Companys revolving credit facilitys total
borrowing capacity is $550 million, which includes an
accordion feature that permits the Company to request up to an
additional $100 million in revolving credit commitments at
any time during the life of the revolving credit agreement under
certain conditions. The term of the facility is June 2012. At
December 31, 2009, the Company had $532.2 million
available under its revolving credit facility, including the
$100 million accordion feature. At December 31, 2009,
no amounts were drawn under the revolving credit facility.
At December 31, 2009, total debt outstanding was
$1,041.7 million, compared with $1,111.7 million at
December 31, 2008, with no significant maturities until
2012. The
debt-to-capital
ratio was 39.9% at December 31, 2009, compared with 46.3%
at December 31, 2008. The net
debt-to-capital
ratio (total debt less cash and cash equivalents divided by the
sum of net debt and stockholders equity) was 33.7% at
December 31, 2009, compared with 44.3% at December 31,
2008. The net
debt-to-capital
ratio is presented because the Company is aware that this
measure is used by third parties in evaluating the Company. (See
the Notes to Selected Financial Data included in
Item 6 for a reconciliation of U.S. GAAP measures to
comparable non-GAAP measures).
Additional financing activities for 2009 include the receipt of
net cash proceeds from the exercise of employee stock options of
$11.6 million compared with $7.5 million in 2008. Cash
dividends paid were $25.6 million in 2009, compared with
$25.7 million in 2008. In 2008, the Company repaid
$21.4 million in life insurance policy loans.
Repurchases of 1.3 million shares of the Companys
common stock in 2008 totaled $57.4 million. No shares were
repurchased in 2009. At December 31, 2009,
$68.5 million was available under the current Board
authorization for future share repurchases. On January 28,
2010, the Board of Directors authorized an increase of
$75 million in the authorization for the repurchase of its
common stock. This increase was added to the $68.5 million
that remained available from existing authorizations approved in
2008, for a total of $143.5 million available for
repurchases of the Companys common stock. Subsequent to
December 31, 2009, the Company repurchased 1,128,200 shares
of its common stock for approximately $41.8 million. The
remaining balance available for repurchases of the
Companys common stock is $101.7 million as of the
filing of this report.
As a result of all of the Companys cash flow activities in
2009, cash and cash equivalents at December 31, 2009
totaled $246.4 million, compared with $87.0 million at
December 31, 2008. Additionally, the Company is in
compliance with all of its debt covenants, which includes its
financial covenants, for all of its debt agreements. The Company
believes it has sufficient cash-generating capabilities from
domestic and unrestricted foreign sources, available credit
facilities and access to long-term capital funds to enable it to
meet its operating needs and contractual obligations in the
foreseeable future.
29
The following table summarizes AMETEKs contractual cash
obligations and the effect such obligations are expected to have
on the Companys liquidity and cash flows in future years
at December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due
|
|
|
|
|
|
|
Less
|
|
|
One to
|
|
|
Four to
|
|
|
After
|
|
|
|
|
|
|
Than
|
|
|
Three
|
|
|
Five
|
|
|
Five
|
|
Contractual Obligations(4)
|
|
Total
|
|
|
One Year
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
|
|
(In millions)
|
|
|
Long-term debt(1)
|
|
$
|
1,017.1
|
|
|
$
|
80.8
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
936.3
|
|
Capital lease(2)
|
|
|
13.9
|
|
|
|
0.9
|
|
|
|
1.8
|
|
|
|
1.8
|
|
|
|
9.4
|
|
Other indebtedness
|
|
|
10.7
|
|
|
|
4.1
|
|
|
|
3.7
|
|
|
|
2.4
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
1,041.7
|
|
|
|
85.8
|
|
|
|
5.5
|
|
|
|
4.2
|
|
|
|
946.2
|
|
Interest on long-term fixed-rate debt
|
|
|
479.9
|
|
|
|
63.6
|
|
|
|
119.7
|
|
|
|
119.5
|
|
|
|
177.1
|
|
Noncancellable operating leases
|
|
|
76.0
|
|
|
|
16.3
|
|
|
|
20.5
|
|
|
|
11.2
|
|
|
|
28.0
|
|
Purchase obligations(3)
|
|
|
161.9
|
|
|
|
148.3
|
|
|
|
13.4
|
|
|
|
0.2
|
|
|
|
|
|
Employee severance and other
|
|
|
23.1
|
|
|
|
23.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,782.6
|
|
|
$
|
337.1
|
|
|
$
|
159.1
|
|
|
$
|
135.1
|
|
|
$
|
1,151.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes the $450 million private placement completed in
2007 and the $350 million private placement completed in
2008. |
|
(2) |
|
Represents a capital lease for a building and land associated
with the Cameca acquisition. The lease has a term of twelve
years, which began July 2006, and is payable quarterly. |
|
(3) |
|
Purchase obligations primarily consist of contractual
commitments to purchase certain inventories at fixed prices. |
|
(4) |
|
The liability for uncertain tax positions was not included in
the table of contractual obligations as of December 31,
2009 because the timing of the settlements of these uncertain
tax positions cannot be reasonably estimated at this time. See
Note 13 to the consolidated financial statements for
further details. |
Other
Commitments
The Company has standby letters of credit and surety bonds of
$20.4 million related to performance and payment guarantees
at December 31, 2009. Based on experience with these
arrangements, the Company believes that any obligations that may
arise will not be material to its financial position.
The Company may, from time to time, repurchase its long-term
debt in privately negotiated transactions, depending upon
availability, market conditions and other factors.
Critical
Accounting Policies
The Company has identified its critical accounting policies as
those accounting policies that can have a significant impact on
the presentation of the Companys financial condition and
results of operations and that require the use of complex and
subjective estimates based upon past experience and
managements judgment. Because of the uncertainty inherent
in such estimates, actual results may differ materially from the
estimates used. The consolidated financial statements and
related notes contain information that is pertinent to the
Companys accounting policies and to Managements
Discussion and Analysis. The information that follows represents
additional specific disclosures about the Companys
accounting policies regarding risks, estimates, subjective
decisions or assessments whereby materially different results of
operations and financial condition could have been reported had
different assumptions been used or different conditions existed.
Primary disclosure of the Companys significant accounting
policies is in Note 1 to the consolidated financial
statements.
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|
Revenue Recognition. The Company recognizes
revenue on product sales in the period when the sales process is
complete. This generally occurs when products are shipped to the
customer in accordance with terms of an agreement of sale, under
which title and risk of loss have been transferred,
collectibility is reasonably assured and pricing is fixed or
determinable. For a small percentage of sales where title and
risk
|
30
|
|
|
|
|
of loss passes at point of delivery, the Company recognizes
revenue upon delivery to the customer, assuming all other
criteria for revenue recognition are met. The policy with
respect to sales returns and allowances generally provides that
the customer may not return products or be given allowances,
except at the Companys option. The Company has agreements
with distributors that do not provide expanded rights of return
for unsold products. The distributor purchases the product from
the Company, at which time title and risk of loss transfers to
the distributor. The Company does not offer substantial sales
incentives and credits to its distributors other than volume
discounts. The Company accounts for the sales incentive as a
reduction of revenues when the sale is recognized. Accruals for
sales returns, other allowances and estimated warranty costs are
provided at the time revenue is recognized based upon past
experience. At December 31, 2009, 2008 and 2007, the
accrual for future warranty obligations was $16.0 million,
$16.1 million and $14.4 million, respectively. The
Companys expense for warranty obligations was
$8.2 million, $12.2 million and $11.3 million in
2009, 2008 and 2007, respectively. The warranty periods for
products sold vary widely among the Companys operations,
but for the most part do not exceed one year. The Company
calculates its warranty expense provision based on past warranty
experience and adjustments are made periodically to reflect
actual warranty expenses. If actual future sales returns and
allowances and warranty amounts are higher than past experience,
additional accruals may be required.
|
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|
Accounts Receivable. The Company maintains
allowances for estimated losses resulting from the inability of
specific customers to meet their financial obligations to the
Company. A specific reserve for bad debts is recorded against
the amount due from these customers. For all other customers,
the Company recognizes reserves for bad debts based on the
length of time specific receivables are past due based on its
historical experience. If the financial condition of the
Companys customers were to deteriorate, resulting in their
inability to make payments, additional allowances may be
required. The allowance for possible losses on receivables was
$5.8 million and $8.5 million at December 31,
2009 and 2008, respectively.
|
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|
|
Inventories. The Company uses the
first-in,
first-out (FIFO) method of accounting, which
approximates current replacement cost, for approximately 66% of
its inventories at December 31, 2009. The
last-in,
first-out (LIFO) method of accounting is used to
determine cost for the remaining 34% of its inventory at
December 31, 2009. For inventories where cost is determined
by the LIFO method, the FIFO value would have been
$20.8 million and $30.8 million higher than the LIFO
value reported in the consolidated balance sheet at
December 31, 2009 and 2008, respectively. The Company
provides estimated inventory reserves for slow-moving and
obsolete inventory based on current assessments about future
demand, market conditions, customers who may be experiencing
financial difficulties and related management initiatives. If
these factors are less favorable than those projected by
management, additional inventory reserves may be required.
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|
Goodwill and Other Intangibles
Assets. Goodwill and other intangible assets with
indefinite lives, primarily trademarks and trade names, are not
amortized; rather, they are tested for impairment at least
annually. The impairment test for goodwill requires a two-step
process. The first step is to compare the carrying amount of the
reporting units net assets to the fair value of the
reporting unit. If the fair value exceeds the carrying value, no
further evaluation is required and no impairment loss is
recognized. If the carrying amount exceeds the fair value, then
the second step must be completed, which involves allocating the
fair value of the reporting unit to each asset and liability,
with the excess being implied goodwill. An impairment loss
occurs if the amount of the recorded goodwill exceeds the
implied goodwill. The Company would be required to record such
impairment losses.
|
The Company identifies its reporting units at the component
level, which is one level below our operating segments.
Generally, goodwill arises from acquisitions of specific
operating companies and is assigned to the reporting units based
upon the reporting unit in which that operating company resides.
Our reporting units are composed of the business units one level
below our operating segment at which discrete financial
information is prepared and regularly reviewed by segment
management.
The Company principally relies on a discounted cash flow
analysis to determine the fair value of each reporting unit,
which considers forecasted cash flows discounted at an
appropriate discount rate. The Company believes that market
participants would use a discounted cash flow analysis to
determine the fair
31
value of its reporting units in a sales transaction. The annual
goodwill impairment test requires the Company to make a number
of assumptions and estimates concerning future levels of revenue
growth, operating margins, depreciation, amortization and
working capital requirements, which are based upon the
Companys long range plan. The Companys long range
plan is updated as part of its annual planning process and is
reviewed and approved by management. The discount rate is an
estimate of the overall after-tax rate of return required by a
market participant whose weighted average cost of capital
includes both equity and debt, including a risk premium. While
the Company uses the best available information to prepare its
cash flow and discount rate assumptions, actual future cash
flows or market conditions could differ significantly resulting
in future impairment charges related to recorded goodwill
balances. While there are always changes in assumptions to
reflect changing business and market conditions, the
Companys overall methodology and the population of
assumptions used have remained unchanged. In order to evaluate
the sensitivity of the fair value calculations on the goodwill
impairment test, the Company applied a hypothetical 10% decrease
in fair values of each reporting unit. The results (expressed as
a percentage of carrying value for the respective reporting
unit) from this hypothetical 10% decrease in fair value ranged
from an excess of the fair values of the Companys
reporting units over their respective carrying values of 22% to
411% for each of the Companys reporting units.
The impairment test for indefinite-lived intangibles other than
goodwill (primarily trademarks and trade names) consists of a
comparison of the fair value of the indefinite-lived intangible
asset to the carrying value of the asset as of the impairment
testing date. The Company estimates the fair value of its
indefinite-lived intangibles using the relief from royalty
method. The Company believes the relief from royalty method is a
widely used valuation technique for such assets. The fair value
derived from the relief from royalty method is measured as the
discounted cash flow savings realized from owning such
trademarks and trade names and not having to pay a royalty for
their use.
The Companys acquisitions have generally included a
significant goodwill component and the Company expects to
continue to make acquisitions. At December 31, 2009,
goodwill and other indefinite-lived intangible assets totaled
$1,447.4 million, or 44.6% of the Companys total
assets. The Company performed its required annual impairment
tests in the fourth quarter of 2009 and determined that the
Companys goodwill and indefinite-lived intangibles were
not impaired. There can be no assurance that goodwill or
indefinite-lived intangibles impairment will not occur in the
future.
Other intangible assets with finite lives are evaluated for
impairment when events or changes in circumstances indicate the
carrying value may not be recoverable. The carrying value of
other intangible assets with finite lives are considered
impaired when the total projected undiscounted cash flows from
those assets are less than the carrying value. In that event, a
loss is recognized based on the amount by which the carrying
value exceeds the fair market value of those assets. Fair market
value is determined primarily using present value techniques
based on projected cash flows from the asset group.
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Pensions. The Company has U.S. and
foreign defined benefit and defined contribution pension plans.
The most significant elements in determining the Companys
pension income or expense are the assumed pension liability
discount rate and the expected return on plan assets. The
pension discount rate reflects the current interest rate at
which the pension liabilities could be settled at the valuation
date. At the end of each year, the Company determines the
assumed discount rate to be used to discount plan liabilities.
In estimating this rate for 2009, the Company considered rates
of return on high-quality, fixed-income investments that have
maturities consistent with the anticipated funding requirements
of the plan. The discount rate used in determining the 2009
pension cost was 6.50% for U.S. defined benefit pension
plans and 6.09% for foreign plans. The discount rate used for
determining the funded status of the plans at December 31,
2009 and determining the 2010 defined benefit pension cost is
5.90% for U.S. plans and 5.98% for foreign plans. In
estimating the U.S. and foreign discount rates, the
Companys actuaries developed a customized discount rate
appropriate to the plans projected benefit cash flow based
on yields derived from a database of long-term bonds at
consistent maturity dates. The Company used an expected
long-term rate of return on plan assets for 2009 of 8.25% for
U.S. defined benefit pension plans and 6.97% for foreign
plans. The Company will continue to use these rates for 2010 for
the U.S. and foreign plans, respectively. The Company
determines the expected long-term rate of return based primarily
on its expectation of future returns for the
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pension plans investments. Additionally, the Company
considers historical returns on comparable fixed-income
investments and equity investments and adjusts its estimate as
deemed appropriate. The rate of compensation increase used in
determining the 2009 pension expense for the U.S. plans was
3.75% and was 2.98% for the foreign plans. Both the
U.S. and foreign plans rates of compensation will
remain unchanged in 2010. For the year ended December 31,
2009, the Company recognized consolidated pre-tax pension
expense of $10.3 million from its U.S. and foreign
defined benefit pension plans as compared with pre-tax pension
income of $6.8 million recognized for these plans in 2008.
The Company estimates its 2010 U.S. and foreign defined
benefit pension plans pre-tax income to be approximately
$1.6 million.
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All unrecognized prior service costs, remaining transition
obligations or assets and actuarial gains and losses have been
recognized, net of tax effects, as a charge to accumulated other
comprehensive income (AOCI) in stockholders
equity and will be amortized as a component of net periodic
pension cost. The Company uses a December 31 measurement date
(the date at which plan assets and benefit obligations are
measured) for its U.S. and foreign defined benefit plans.
To fund the plans, the Company made cash contributions to its
defined benefit pension plans during 2009 which totaled
$21.1 million, compared with $79.9 million in 2008.
The Company anticipates making approximately $2.0 million
to $5.0 million in cash contributions to its defined
benefit pension plans in 2010.
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Income Taxes. The process of providing for
income taxes and determining the related balance sheet accounts
requires management to assess uncertainties, make judgments
regarding outcomes and utilize estimates. The Company conducts a
broad range of operations around the world and is therefore
subject to complex tax regulations in numerous international
taxing jurisdictions, resulting at times in tax audits, disputes
and potential litigation, the outcome of which is uncertain.
Management must make judgments currently about such
uncertainties and determine estimates of the Companys tax
assets and liabilities. To the extent the final outcome differs,
future adjustments to the Companys tax assets and
liabilities may be necessary.
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The Company assesses the realizability of its deferred tax
assets, taking into consideration the Companys forecast of
future taxable income, available net operating loss
carryforwards and available tax planning strategies that could
be implemented to realize the deferred tax assets. Based on this
assessment, management must evaluate the need for, and the
amount of, valuation allowances against the Companys
deferred tax assets. To the extent facts and circumstances
change in the future, adjustments to the valuation allowances
may be required.
The Company assesses the uncertainty in its tax positions, by
applying a minimum recognition threshold a tax position is
required to meet before a tax benefit is recognized in the
financial statements. Once the minimum threshold is met, using a
more likely than not standard, a series of probability estimates
is made for each item to properly measure and record a tax
benefit. The tax benefit recorded is generally equal to the
highest probable outcome that is more than 50% likely to be
realized after full disclosure and resolution of a tax
examination. The underlying probabilities are determined based
on the best available objective evidence such as recent tax
audit outcomes, published guidance, external expert opinion, or
by analogy to the outcome of similar issues in the past. There
can be no assurance that these estimates will ultimately be
realized given continuous changes in tax policy, legislation and
audit practice. The Company recognizes interest and penalties
accrued related to uncertain tax positions in income tax expense.
Recently
Issued Financial Accounting Standards
In January 2010, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update
(ASU)
No. 2010-06,
Fair value Measurements and Disclosures (ASU
2010-06).
ASU 2010-06
provides amendments that clarify existing disclosures and
require new disclosures related to fair value measurements,
particularly to provide greater disaggregated information on
each class of assets and liabilities and more robust disclosures
on transfers between levels 1 and 2 and activity in
level 3 fair value measurements. The new disclosures and
clarifications of existing disclosures are effective for interim
and annual reporting periods beginning after December 15,
2009, except for the disclosures about activity in level 3
fair value measurements. Those disclosures are effective for
fiscal years beginning after December 15, 2010 and for
interim periods within those fiscal years. The Company is
currently evaluating the impact of adopting ASU
2010-06 on
our fair value measurement disclosures.
33
In October 2009, the FASB issued ASU
No. 2009-14,
Certain Revenue Arrangements That Include Software Elements
(ASU
2009-14).
ASU 2009-14
provides guidance for revenue arrangements that include both
tangible products and software elements that are essential
to the functionality of the hardware. ASU
2009-14
provides factors to help constituents determine what software
elements are considered essential to the functionality of the
tangible product. This guidance will now subject
software-enabled products to other revenue guidance and
disclosure requirements, such as guidance surrounding revenue
arrangements with multiple-deliverables. ASU
2009-14 is
effective for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15,
2010 and is not expected to have a significant impact on the
Companys consolidated results of operations, financial
position and cash flows.
In October 2009, the FASB issued ASU
No. 2009-13,
Multiple-Deliverable Revenue Arrangements (ASU
2009-13).
ASU 2009-13
provides guidance on accounting and reporting for arrangements
including multiple revenue-generating activities. ASU
2009-13
provides guidance for separating deliverables, measuring and
allocating arrangement consideration to one or more units of
accounting. ASU
2009-13 also
requires significantly expanded disclosures to provide
information about a vendors multiple-deliverable revenue
arrangements and the judgments made by the vendor that affect
the timing or amount of revenue recognition. ASU
2009-13 is
effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after
June 15, 2010 and is not expected to have a significant
impact on the Companys consolidated results of operations,
financial position and cash flows.
In August 2009, the FASB issued ASU
No. 2009-05,
Measuring Liabilities at Fair Value (ASU
2009-05),
which provides clarification on the application of fair value
techniques when a quoted price in an active market for the
identical liability is not available and clarifies that when
estimating the fair value of a liability, the fair value is not
adjusted to reflect the impact of contractual restrictions that
prevent its transfer. ASU
2009-05 was
effective on October 1, 2009 for the Company and the
adoption did not have a significant impact on the Companys
consolidated results of operations, financial position and cash
flows.
In June 2009, the FASB issued Financial Accounting Standards
(SFAS) No. 168, The FASB Accounting
Standards
Codificationtm
and the Hierarchy of Generally Accepted Accounting Principles
a replacement of FASB Statement No. 162
(SFAS 168). SFAS 168 identifies the
sources of accounting principles and the framework for selecting
the principles used in the preparation of financial statements
of nongovernmental entities that are presented in conformity
with GAAP in the United States (the GAAP hierarchy).
Rules and interpretive releases of the Securities and Exchange
Commission (SEC) under authority of federal
securities laws are also sources of authoritative GAAP for SEC
registrants. SFAS 168 was effective for financial
statements issued for interim and annual periods ending after
September 15, 2009. The adoption of SFAS 168 did not
have an impact on the Companys consolidated results of
operations, financial position and cash flows.
In May 2009, the FASB issued Accounting Standards Codification
(ASC) Subsequent Events Topic 855, (ASC
855). ASC 855 establishes general standards of accounting
for and disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available
to be issued. ASC 855 was effective for interim and annual
reporting periods ending after June 15, 2009. The adoption
of ASC 855 did not have an impact on the Companys
consolidated results of operations, financial position and cash
flows. The Company evaluated all events and transactions that
occurred after December 31, 2009 up through
February 25, 2010, the date the Company issued these
financial statements. During this period, the Company did not
have any material recognizable or non-recognizable subsequent
events.
The Company accounts for business combinations in accordance
with FASB ASC Business Combinations Topic 805 (ASC
805), which includes provisions adopted effective
January 1, 2009. The accounting for business combinations
retains the underlying concepts of the previously issued
standard, but changes the method of applying the acquisition
method in a number of significant aspects. These changes were
effective on a prospective basis for business combinations for
which the acquisition date is on or after January 1, 2009,
with the exception of the accounting for valuation allowances on
deferred taxes and acquired tax contingencies. Adjustments for
valuation allowances on deferred taxes and acquired tax
contingencies associated with acquisitions that closed prior to
January 1, 2009 would also apply the revised accounting for
business combination provisions. The adoption of certain
provisions within ASC 805 effective January 1, 2009 did not
have a significant impact on the Companys
34
consolidated results of operations, financial position or cash
flows. However, depending on the nature of an acquisition or the
quantity of acquisitions entered into after the adoption, ASC
805 may significantly impact the Companys
consolidated results of operations, financial position or cash
flows and result in more earnings volatility and generally lower
earnings due to, among other items, the expensing of transaction
costs and restructuring costs of acquired companies.
In April 2009, the FASB issued ASC
820-10-65-4,
Transition Related to FASB Staff Position
FAS 157-4,
Determining Fair Value When the Volume and Level of Activity for
the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly (ASC
820-10-65-4).
ASC
820-10-65-4
amends ASC 820, and provides additional guidance for estimating
fair value in accordance with ASC 820 when the volume and level
of activity for the asset or liability have significantly
decreased and also includes guidance on identifying
circumstances that indicate a transaction is not orderly for
fair value measurements. ASC
820-10-65-4
is applied prospectively with retrospective application not
permitted. ASC
820-10-65-4
was effective for interim and annual periods ending after
June 15, 2009. The adoption of ASC
820-10-65-4
did not have an impact on the Companys consolidated
results of operations, financial position and cash flows.
In April 2009, the FASB issued ASC
320-10-65-1,
Transition Related to FASB Staff Position
FAS 115-2
and
FAS 124-2,
Recognition and Presentation of
Other-Than-Temporary
Impairments (ASC
320-10-65-1).
ASC
320-10-65-1
amends previously issued standards to make the
other-than-temporary
impairments guidance more operational and to improve the
presentation of
other-than-temporary
impairments in the financial statements. ASC
320-10-65-1
replaces the existing requirement that the entitys
management assert it has both the intent and ability to hold an
impaired debt security until recovery with a requirement that
management assert it does not have the intent to sell the
security, and it is more likely than not it will not have to
sell the security before recovery of its cost basis. ASC
320-10-65-1
provides increased disclosure about the credit and noncredit
components of impaired debt securities that are not expected to
be sold and also requires increased and more frequent
disclosures regarding expected cash flows, credit losses and an
aging of securities with unrealized losses. Although ASC
320-10-65-1
does not result in a change in the carrying amount of debt
securities, it does require that the portion of an
other-than-temporary
impairment not related to a credit loss for a
held-to-maturity
security be recognized in a new category of other comprehensive
income and be amortized over the remaining life of the debt
security as an increase in the carrying value of the security.
ASC
320-10-65-1
was effective for interim and annual periods ending after
June 15, 2009. The adoption of ASC
320-10-65-1
did not have an impact on the Companys consolidated
results of operations, financial position and cash flows.
In April 2009, the FASB issued ASC
825-10-65-1,
Transition Related to FASB Staff Position
FAS 107-1
and Accounting Principles Board
28-1,
Interim Disclosures about Fair Value of Financial Instruments
(ASC
825-10-65-1).
ASC
825-10-65-1
amends previously issued standards to require disclosures about
fair value of financial instruments not measured on the balance
sheet at fair value in interim financial statements as well as
in annual financial statements. Prior to ASC
825-10-65-1,
fair values for these assets and liabilities were only disclosed
annually. ASC
825-10-65-1
applies to all financial instruments within the scope of ASC 825
and requires all entities to disclose the methods and
significant assumptions used to estimate the fair value of
financial instruments. ASC
825-10-65-1
was effective for interim periods ending after June 15,
2009. See Note 15.
Internal
Reinvestment
Capital
Expenditures
Capital expenditures were $33.1 million or 1.6% of sales in
2009, compared with $44.2 million or 1.7% of sales in 2008.
56% of the expenditures in 2009 were for improvements to
existing equipment or additional equipment to increase
productivity and expand capacity. The Companys 2009
capital expenditures decreased due to the global economic
recession with a continuing emphasis on spending to improve
productivity and expand manufacturing capabilities. The 2010
capital expenditures are expected to approximate 2.0% of sales,
with a continued emphasis on spending to improve productivity.
Product
Development and Engineering
The Company is committed to research, product development and
engineering activities that are designed to identify and develop
potential new and improved products or enhance existing
products. Research, product development
35
and engineering costs before customer reimbursement were
$101.4 million, $115.9 million and $102.9 million
in 2009, 2008 and 2007, respectively. Customer reimbursements in
2009, 2008 and 2007 were $5.5 million, $6.1 million
and $7.1 million, respectively. These amounts included net
Company-funded research and development expenses of
$50.5 million, $57.5 million and $52.9 million,
respectively. All such expenditures were directed toward the
development of new products and processes and the improvement of
existing products and processes.
Environmental
Matters
Certain historic processes in the manufacture of products have
resulted in environmentally hazardous waste by-products as
defined by federal and state laws and regulations. While these
waste products were handled in compliance with regulations
existing at that time, at December 31, 2009, the Company is
named a Potentially Responsible Party (PRP) at 16
non-AMETEK-owned
former waste disposal or treatment sites (the
non-owned sites). The Company is identified as a
de minimis party in 14 of these sites based on the
low volume of waste attributed to the Company relative to the
amounts attributed to other named PRPs. In ten of these sites,
the Company has reached a tentative agreement on the cost of the
de minimis settlement to satisfy its obligation and is awaiting
executed agreements. The tentatively agreed-to settlement
amounts are fully reserved. In the other four sites, the Company
is continuing to investigate the accuracy of the alleged volume
attributed to the Company as estimated by the parties primarily
responsible for remedial activity at the sites to establish an
appropriate settlement amount. In the two remaining sites where
the Company is a non-de minimis PRP, the Company is
participating in the investigation
and/or
related required remediation as part of a PRP Group and reserves
have been established sufficient to satisfy the Companys
expected obligation. The Company historically has resolved these
issues within established reserve levels and reasonably expects
this result will continue. In addition to these non-owned sites,
the Company has an ongoing practice of providing reserves for
probable remediation activities at certain of its current or
previously owned manufacturing locations (the owned
sites). For claims and proceedings against the Company with
respect to other environmental matters, reserves are established
once the Company has determined that a loss is probable and
estimable. This estimate is refined as the Company moves through
the various stages of investigation, risk assessment,
feasibility study and corrective action processes. In certain
instances, the Company has developed a range of estimates for
such costs and has recorded a liability based on the low end of
the range. It is reasonably possible that the actual cost of
remediation of the individual sites could vary from the current
estimates and the amounts accrued in the consolidated financial
statements; however, the amounts of such variances are not
expected to result in a material change to the consolidated
financial statements. In estimating the Companys liability
for remediation, the Company also considers the likely
proportionate share of the anticipated remediation expense and
the ability of the other PRPs to fulfill their obligations.
Total environmental reserves at December 31, 2009 and 2008
were $27.0 million and $28.4 million, respectively,
for non-owned and owned sites. In 2009, the Company received
$1.3 million of additional reserves from a third party for
existing sites. Additionally, the Company spent
$2.7 million on environmental matters in 2009. The
Companys reserves for environmental liabilities at
December 31, 2009 and 2008 include reserves of
$19.2 million and $17.9 million, respectively, for an
owned site acquired in connection with the fiscal 2005
acquisition of HCC Industries (HCC). The Company is
the designated performing party for the performance of remedial
activities for one of several operating units making up a large
Superfund site in the San Gabriel Valley of California. The
Company has obtained indemnifications and other financial
assurances from the former owners of HCC related to the costs of
the required remedial activities. At December 31, 2009, the
Company has $13.9 million in receivables related to HCC for
probable recoveries from third-party escrow funds and other
committed third-party funds to support the required remediation.
Also, the Company is indemnified by HCCs former owners for
approximately $19.0 million of additional costs.
The Company has agreements with other former owners of certain
of its acquired businesses, as well as new owners of previously
owned businesses. Under certain of the agreements, the former or
new owners retained, or assumed and agreed to indemnify the
Company against, certain environmental and other liabilities
under certain circumstances. The Company and some of these other
parties also carry insurance coverage for some environmental
matters. To date, these parties have met their obligations in
all material respects; however, one of these companies filed for
bankruptcy liquidation in 2007, as discussed further in the
following paragraph.
In August 2009, the Company agreed to a Stipulation and
Settlement Agreement with the San Diego Regional Water
Quality Control Board regarding the 2008 Notice of
Administrative Civil Liability related to a former
36
subsidiary which became a separate company in 1988 and filed for
bankruptcy liquidation in 2007, whereby the Company paid and
deferred minor penalties, which were covered by previously
establish reserves.
The Company believes it has established reserves which are
sufficient to perform all known responsibilities under existing
claims and consent orders. The Company has no reason to believe
that other third parties would fail to perform their obligations
in the future. In the opinion of management, based upon
presently available information and past experience related to
such matters, an adequate provision for probable costs has been
made and the ultimate cost resulting from these actions is not
expected to materially affect the consolidated financial
position, results of operations or cash flows of the Company.
Market
Risk
The Companys primary exposures to market risk are
fluctuations in interest rates, foreign currency exchange rates
and commodity prices, which could impact its results of
operations and financial condition. The Company addresses its
exposure to these risks through its normal operating and
financing activities. The Companys differentiated and
global business activities help to reduce the impact that any
particular market risk may have on its operating earnings as a
whole.
The Companys short-term debt carries variable interest
rates and generally its long-term debt carries fixed rates.
These financial instruments are more fully described in the
notes to the consolidated financial statements.
The foreign currencies to which the Company has the most
significant exchange rate exposure are the Euro, the British
pound, the Japanese yen, the Chinese renminbi and the Mexican
peso. Exposure to foreign currency rate fluctuation is
monitored, and when possible, mitigated through the occasional
use of local borrowings and derivative financial instruments in
the foreign country affected. The effect of translating foreign
subsidiaries balance sheets into U.S. dollars is
included in other comprehensive income within stockholders
equity. Foreign currency transactions have not had a significant
effect on the operating results reported by the Company because
revenues and costs associated with the revenues are generally
transacted in the same foreign currencies.
The primary commodities to which the Company has market exposure
are raw material purchases of nickel, aluminum, copper, steel,
titanium and gold. Exposure to price changes in these
commodities is generally mitigated through adjustments in
selling prices of the ultimate product and purchase order
pricing arrangements, although forward contracts are sometimes
used to manage some of those exposures.
Based on a hypothetical ten percent adverse movement in interest
rates, commodity prices or foreign currency exchange rates, the
Companys best estimate is that the potential losses in
future earnings, fair value of risk-sensitive financial
instruments and cash flows are not material, although the actual
effects may differ materially from the hypothetical analysis.
Forward-Looking
Information
Certain matters discussed in this
Form 10-K
are forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995
(PSLRA), which involve risk and uncertainties that
exist in the Companys operations and business environment
and can be affected by inaccurate assumptions, or by known or
unknown risks and uncertainties. Many such factors will be
important in determining the Companys actual future
results. The Company wishes to take advantage of the safe
harbor provisions of the PSLRA by cautioning readers that
numerous important factors, in some cases have caused, and in
the future could cause, the Companys actual results to
differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company. Some, but not
all, of the factors or uncertainties that could cause actual
results to differ from present expectations are set forth above
and under Item 1A. Risk Factors. The Company undertakes no
obligation to publicly update any forward-looking statements,
whether as a result of new information, subsequent events or
otherwise, unless required by the securities laws to do so.
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Item 7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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Information concerning market risk is set forth under the
heading Market Risk in Managements Discussion
and Analysis of Financial Condition and Results of Operations
herein.
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Item 8.
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Financial
Statements and Supplementary Data
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39
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40
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42
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43
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44
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45
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46
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Financial
Statement Schedules (Item 15(a) 2)
Financial statement schedules have been omitted because either
they are not applicable or the required information is included
in the financial statements or the notes thereto.
38
Managements
Responsibility for Financial Statements
Management has prepared and is responsible for the integrity of
the consolidated financial statements and related information.
The statements are prepared in conformity with
U.S. generally accepted accounting principles consistently
applied and include certain amounts based on managements
best estimates and judgments. Historical financial information
elsewhere in this report is consistent with that in the
financial statements.
In meeting its responsibility for the reliability of the
financial information, management maintains a system of internal
accounting and disclosure controls, including an internal audit
program. The system of controls provides for appropriate
division of responsibility and the application of written
policies and procedures. That system, which undergoes continual
reevaluation, is designed to provide reasonable assurance that
assets are safeguarded and records are adequate for the
preparation of reliable financial data.
Management is responsible for establishing and maintaining
adequate controls over financial reporting. We maintain a system
of internal controls that is designed to provide reasonable
assurance as to the fair and reliable preparation and
presentation of the consolidated financial statements; however,
there are inherent limitations in the effectiveness of any
system of internal controls.
Management recognizes its responsibility for conducting the
Companys activities according to the highest standards of
personal and corporate conduct. That responsibility is
characterized and reflected in a code of business conduct for
all employees, and in a financial code of ethics for the Chief
Executive Officer and Senior Financial Officers, as well as in
other key policy statements publicized throughout the Company.
The Audit Committee of the Board of Directors, which is composed
solely of independent directors who are not employees of the
Company, meets with the independent registered public accounting
firm, the internal auditors and management to satisfy itself
that each is properly discharging its responsibilities. The
report of the Audit Committee is included in the Proxy Statement
of the Company for its 2010 Annual Meeting. Both the independent
registered public accounting firm and the internal auditors have
direct access to the Audit Committee.
The Companys independent registered public accounting
firm, Ernst & Young LLP, is engaged to render an
opinion as to whether managements financial statements
present fairly, in all material respects, the Companys
financial position and operating results. This report is
included on page 41.
Managements
Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting,
as such term is defined in the Exchange Act
Rules 13a-15(f)
and
15d-15(f).
Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the
effectiveness of the Companys internal control over
financial reporting as of December 31, 2009 based on the
framework in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on that
evaluation, our management concluded that the Companys
internal control over financial reporting was effective as of
December 31, 2009.
The Companys internal control over financial reporting as
of December 31, 2009 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, as
stated in their report, which appears on page 40.
/s/ AMETEK, Inc.
February 25, 2010
39
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Board of Directors and Stockholders of AMETEK, Inc.:
We have audited AMETEK, Inc.s internal control over
financial reporting as of December 31, 2009, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). AMETEK, Inc.s
management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting
included in the accompanying Managements Report on
Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the companys
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, AMETEK, Inc. maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2009, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of AMETEK, Inc. as of
December 31, 2009 and 2008, and the related consolidated
statements of income, cash flows, and stockholders equity
for each of the three years in the period ended
December 31, 2009, and our report dated February 25,
2010 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
February 25, 2010
40
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON FINANCIAL STATEMENTS
To the Board of Directors and Stockholders of AMETEK, Inc.:
We have audited the accompanying consolidated balance sheets of
AMETEK, Inc. as of December 31, 2009 and 2008, and the
related consolidated statements of income, cash flows, and
stockholders equity for each of the three years in the
period ended December 31, 2009. These financial statements
are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of AMETEK, Inc. at December 31, 2009 and
2008, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
December 31, 2009, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
AMETEK, Inc.s internal control over financial reporting as
of December 31, 2009, based on criteria established in
Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
and our report dated February 25, 2010 expressed an
unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
February 25, 2010
41
AMETEK,
Inc.
(In thousands, except per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net sales
|
|
$
|
2,098,355
|
|
|
$
|
2,531,135
|
|
|
$
|
2,136,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales, excluding depreciation
|
|
|
1,435,953
|
|
|
|
1,730,086
|
|
|
|
1,444,514
|
|
Selling, general and administrative
|
|
|
254,143
|
|
|
|
322,552
|
|
|
|
263,472
|
|
Depreciation
|
|
|
42,209
|
|
|
|
45,843
|
|
|
|
42,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
1,732,305
|
|
|
|
2,098,481
|
|
|
|
1,750,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
366,050
|
|
|
|
432,654
|
|
|
|
386,574
|
|
Other expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(68,750
|
)
|
|
|
(63,652
|
)
|
|
|
(46,866
|
)
|
Other, net
|
|
|
(2,667
|
)
|
|
|
(2,786
|
)
|
|
|
(3,264
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
294,633
|
|
|
|
366,216
|
|
|
|
336,444
|
|
Provision for income taxes
|
|
|
88,863
|
|
|
|
119,264
|
|
|
|
108,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
205,770
|
|
|
$
|
246,952
|
|
|
$
|
228,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.93
|
|
|
$
|
2.33
|
|
|
$
|
2.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
1.91
|
|
|
$
|
2.30
|
|
|
$
|
2.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares
|
|
|
106,788
|
|
|
|
106,148
|
|
|
|
105,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares
|
|
|
107,850
|
|
|
|
107,443
|
|
|
|
107,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
42
AMETEK,
Inc.
Consolidated
Balance Sheet
(In thousands, except share
amounts)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
246,356
|
|
|
$
|
86,980
|
|
Marketable securities
|
|
|
4,994
|
|
|
|
4,230
|
|
Receivables, less allowance for possible losses
|
|
|
331,383
|
|
|
|
406,012
|
|
Inventories
|
|
|
311,542
|
|
|
|
349,509
|
|
Deferred income taxes
|
|
|
30,669
|
|
|
|
30,919
|
|
Other current assets
|
|
|
44,486
|
|
|
|
76,936
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
969,430
|
|
|
|
954,586
|
|
Property, plant and equipment, net
|
|
|
310,053
|
|
|
|
307,908
|
|
Goodwill
|
|
|
1,277,291
|
|
|
|
1,240,052
|
|
Other intangibles, net of accumulated amortization
|
|
|
521,888
|
|
|
|
441,785
|
|
Investments and other assets
|
|
|
167,370
|
|
|
|
111,211
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,246,032
|
|
|
$
|
3,055,542
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Short-term borrowings and current portion of long-term debt
|
|
$
|
85,801
|
|
|
$
|
18,438
|
|
Accounts payable
|
|
|
191,779
|
|
|
|
203,742
|
|
Income taxes payable
|
|
|
13,345
|
|
|
|
31,649
|
|
Accrued liabilities
|
|
|
133,357
|
|
|
|
193,684
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
424,282
|
|
|
|
447,513
|
|
Long-term debt
|
|
|
955,880
|
|
|
|
1,093,243
|
|
Deferred income taxes
|
|
|
206,354
|
|
|
|
144,941
|
|
Other long-term liabilities
|
|
|
92,492
|
|
|
|
82,073
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,679,008
|
|
|
|
1,767,770
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value; authorized:
5,000,000 shares; none issued
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; authorized:
400,000,000 shares;
|
|
|
|
|
|
|
|
|
issued: 2009 111,000,578 shares;
2008 110,188,937 shares
|
|
|
1,110
|
|
|
|
1,102
|
|
Capital in excess of par value
|
|
|
224,057
|
|
|
|
203,000
|
|
Retained earnings
|
|
|
1,500,471
|
|
|
|
1,320,470
|
|
Accumulated other comprehensive (loss)
|
|
|
(75,281
|
)
|
|
|
(144,767
|
)
|
Treasury stock: 2009 3,116,579 shares;
2008 3,461,541 shares
|
|
|
(83,333
|
)
|
|
|
(92,033
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,567,024
|
|
|
|
1,287,772
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
3,246,032
|
|
|
$
|
3,055,542
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
43
AMETEK,
Inc.
Consolidated
Statement of Stockholders Equity
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
|
Income
|
|
|
Equity
|
|
|
Income
|
|
|
Equity
|
|
|
Income
|
|
|
Equity
|
|
|
Capital Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, $0.01 par value
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock, $0.01 par value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year
|
|
|
|
|
|
|
1,102
|
|
|
|
|
|
|
|
1,097
|
|
|
|
|
|
|
|
1,085
|
|
Shares issued
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
|
|
|
|
|
1,110
|
|
|
|
|
|
|
|
1,102
|
|
|
|
|
|
|
|
1,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital in Excess of Par Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year
|
|
|
|
|
|
|
203,000
|
|
|
|
|
|
|
|
174,450
|
|
|
|
|
|
|
|
134,001
|
|
Issuance of common stock under employee stock plans
|
|
|
|
|
|
|
3,459
|
|
|
|
|
|
|
|
3,474
|
|
|
|
|
|
|
|
15,455
|
|
Share-based compensation costs
|
|
|
|
|
|
|
13,502
|
|
|
|
|
|
|
|
20,186
|
|
|
|
|
|
|
|
15,530
|
|
Excess tax benefits from exercise of stock options
|
|
|
|
|
|
|
4,096
|
|
|
|
|
|
|
|
4,890
|
|
|
|
|
|
|
|
9,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
|
|
|
|
|
224,057
|
|
|
|
|
|
|
|
203,000
|
|
|
|
|
|
|
|
174,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year
|
|
|
|
|
|
|
1,320,470
|
|
|
|
|
|
|
|
1,099,111
|
|
|
|
|
|
|
|
902,379
|
|
Adoption of FIN 48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,901
|
)
|
Net income
|
|
$
|
205,770
|
|
|
|
205,770
|
|
|
$
|
246,952
|
|
|
|
246,952
|
|
|
$
|
228,020
|
|
|
|
228,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid
|
|
|
|
|
|
|
(25,579
|
)
|
|
|
|
|
|
|
(25,685
|
)
|
|
|
|
|
|
|
(25,748
|
)
|
Other
|
|
|
|
|
|
|
(190
|
)
|
|
|
|
|
|
|
92
|
|
|
|
|
|
|
|
361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
|
|
|
|
|
1,500,471
|
|
|
|
|
|
|
|
1,320,470
|
|
|
|
|
|
|
|
1,099,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive (Loss) Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year
|
|
|
|
|
|
|
(50,706
|
)
|
|
|
|
|
|
|
7,331
|
|
|
|
|
|
|
|
(1,137
|
)
|
Translation adjustments
|
|
|
38,357
|
|
|
|
|
|
|
|
(46,784
|
)
|
|
|
|
|
|
|
6,056
|
|
|
|
|
|
Gain (loss) on net investment hedges, net of tax (expense)
benefit of ($2,290), $6,058 and ($1,298) in 2009, 2008 and 2007,
respectively
|
|
|
4,253
|
|
|
|
|
|
|
|
(11,253
|
)
|
|
|
|
|
|
|
2,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,610
|
|
|
|
42,610
|
|
|
|
(58,037
|
)
|
|
|
(58,037
|
)
|
|
|
8,468
|
|
|
|
8,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
|
|
|
|
|
(8,096
|
)
|
|
|
|
|
|
|
(50,706
|
)
|
|
|
|
|
|
|
7,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year
|
|
|
|
|
|
|
(93,360
|
)
|
|
|
|
|
|
|
(3,040
|
)
|
|
|
|
|
|
|
(33,213
|
)
|
Change in pension plans, net of tax (expense) benefit of
($15,830), $56,344 and ($14,141) in 2009, 2008 and 2007,
respectively
|
|
|
26,239
|
|
|
|
26,239
|
|
|
|
(90,320
|
)
|
|
|
(90,320
|
)
|
|
|
30,173
|
|
|
|
30,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
|
|
|
|
|
(67,121
|
)
|
|
|
|
|
|
|
(93,360
|
)
|
|
|
|
|
|
|
(3,040
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain (loss) on
available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year
|
|
|
|
|
|
|
(701
|
)
|
|
|
|
|
|
|
1,079
|
|
|
|
|
|
|
|
798
|
|
Increase (decrease) during the year, net of tax benefit
(expense) of $343, ($958) and $151 in 2009, 2008 and 2007,
respectively
|
|
|
637
|
|
|
|
637
|
|
|
|
(1,780
|
)
|
|
|
(1,780
|
)
|
|
|
281
|
|
|
|
281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
|
|
|
|
|
(64
|
)
|
|
|
|
|
|
|
(701
|
)
|
|
|
|
|
|
|
1,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss) for the year
|
|
|
69,486
|
|
|
|
|
|
|
|
(150,137
|
)
|
|
|
|
|
|
|
38,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year
|
|
$
|
275,256
|
|
|
|
|
|
|
$
|
96,815
|
|
|
|
|
|
|
$
|
266,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive (loss) income at the end of the
year
|
|
|
|
|
|
|
(75,281
|
)
|
|
|
|
|
|
|
(144,767
|
)
|
|
|
|
|
|
|
5,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year
|
|
|
|
|
|
|
(92,033
|
)
|
|
|
|
|
|
|
(39,321
|
)
|
|
|
|
|
|
|
(37,241
|
)
|
Issuance of common stock under employee stock plans
|
|
|
|
|
|
|
8,700
|
|
|
|
|
|
|
|
4,732
|
|
|
|
|
|
|
|
3,357
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57,444
|
)
|
|
|
|
|
|
|
(5,437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
|
|
|
|
|
(83,333
|
)
|
|
|
|
|
|
|
(92,033
|
)
|
|
|
|
|
|
|
(39,321
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity
|
|
|
|
|
|
$
|
1,567,024
|
|
|
|
|
|
|
$
|
1,287,772
|
|
|
|
|
|
|
$
|
1,240,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
44
AMETEK,
Inc.
Consolidated
Statement of Cash Flows
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Cash provided by (used for):
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
205,770
|
|
|
$
|
246,952
|
|
|
$
|
228,020
|
|
Adjustments to reconcile net income to total operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
65,500
|
|
|
|
63,261
|
|
|
|
52,665
|
|
Deferred income tax expense
|
|
|
5,768
|
|
|
|
29,742
|
|
|
|
4,769
|
|
Share-based compensation expense
|
|
|
13,502
|
|
|
|
20,186
|
|
|
|
15,530
|
|
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in receivables
|
|
|
87,146
|
|
|
|
6,636
|
|
|
|
(26,944
|
)
|
Decrease (increase) in inventories and other current assets
|
|
|
83,622
|
|
|
|
(35,180
|
)
|
|
|
194
|
|
(Decrease) increase in payables, accruals and income taxes
|
|
|
(91,622
|
)
|
|
|
3,161
|
|
|
|
13,421
|
|
Increase (decrease) in other long-term liabilities
|
|
|
3,345
|
|
|
|
(1,907
|
)
|
|
|
(7,153
|
)
|
Pension contribution
|
|
|
(21,127
|
)
|
|
|
(79,905
|
)
|
|
|
(5,162
|
)
|
Other
|
|
|
12,767
|
|
|
|
(5,681
|
)
|
|
|
3,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating activities
|
|
|
364,671
|
|
|
|
247,265
|
|
|
|
278,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
(33,062
|
)
|
|
|
(44,215
|
)
|
|
|
(37,620
|
)
|
Purchases of businesses, net of cash acquired
|
|
|
(72,919
|
)
|
|
|
(463,012
|
)
|
|
|
(300,569
|
)
|
(Increase) decrease in marketable securities
|
|
|
(638
|
)
|
|
|
6,323
|
|
|
|
(1,700
|
)
|
Other
|
|
|
275
|
|
|
|
4,282
|
|
|
|
5,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investing activities
|
|
|
(106,344
|
)
|
|
|
(496,622
|
)
|
|
|
(334,661
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in short-term borrowings
|
|
|
(13,013
|
)
|
|
|
69,693
|
|
|
|
(162,589
|
)
|
Additional long-term borrowings
|
|
|
1,466
|
|
|
|
430,000
|
|
|
|
370,000
|
|
Reduction in long-term borrowings
|
|
|
(80,817
|
)
|
|
|
(232,835
|
)
|
|
|
(26,553
|
)
|
Repayment of life insurance policy loans
|
|
|
|
|
|
|
(21,394
|
)
|
|
|
|
|
Repurchases of common stock
|
|
|
|
|
|
|
(57,444
|
)
|
|
|
(5,437
|
)
|
Cash dividends paid
|
|
|
(25,579
|
)
|
|
|
(25,685
|
)
|
|
|
(25,748
|
)
|
Excess tax benefits from share-based payments
|
|
|
4,096
|
|
|
|
4,890
|
|
|
|
9,464
|
|
Proceeds from employee stock plans and other
|
|
|
11,328
|
|
|
|
6,238
|
|
|
|
14,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing activities
|
|
|
(102,519
|
)
|
|
|
173,463
|
|
|
|
174,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
3,568
|
|
|
|
(7,265
|
)
|
|
|
3,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
159,376
|
|
|
|
(83,159
|
)
|
|
|
121,048
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
86,980
|
|
|
|
170,139
|
|
|
|
49,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
$
|
246,356
|
|
|
$
|
86,980
|
|
|
$
|
170,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
45
AMETEK,
Inc.
|
|
1.
|
Significant
Accounting Policies
|
Basis of
Consolidation
The accompanying consolidated financial statements reflect the
operations, financial position and cash flows of AMETEK, Inc.
(the Company), and include the accounts of the
Company and subsidiaries, after elimination of all intercompany
transactions in the consolidation. The Companys
investments in 50% or less owned joint ventures are accounted
for by the equity method of accounting. Such investments are not
significant to the Companys consolidated results of
operations, financial position or cash flows.
Use of
Estimates
The preparation of financial statements in conformity with
U.S. generally accepted accounting principles
(GAAP) requires management to make estimates and
assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates.
Cash
Equivalents, Securities and Other Investments
All highly liquid investments with maturities of three months or
less when purchased are considered cash equivalents. At
December 31, 2009 and 2008, all of the Companys
equity securities and fixed-income securities (primarily those
of a captive insurance subsidiary) are classified as
available-for-sale,
although the Company may hold fixed-income securities until
their maturity dates. Fixed-income securities generally mature
within three years. The aggregate market value of equity and
fixed-income securities at December 31, 2009 and 2008 was
$13.2 million ($13.5 million amortized cost) and
$11.9 million ($12.9 million amortized cost),
respectively. The temporary unrealized gain or loss on such
securities is recorded as a separate component of accumulated
other comprehensive income (in stockholders equity), and
is not significant. The Company had $0.2 million of
other-than-temporary
impairment losses in 2008. Certain of the Companys other
investments, which are not significant, are also accounted for
by the equity method of accounting as discussed above.
Accounts
Receivable
The Company maintains allowances for estimated losses resulting
from the inability of specific customers to meet their financial
obligations to the Company. A specific reserve for doubtful
receivables is recorded against the amount due from these
customers. For all other customers, the Company recognizes
reserves for doubtful receivables based on the length of time
specific receivables are past due based on past experience. The
allowance for possible losses on receivables was
$5.8 million and $8.5 million at December 31,
2009 and 2008, respectively. See Note 8.
Inventories
The Company uses the
first-in,
first-out (FIFO) method of accounting, which
approximates current replacement cost, for 66% of its
inventories at December 31, 2009. The
last-in,
first-out (LIFO) method of accounting is used to
determine cost for the remaining 34% of the Companys
inventory at December 31, 2009. For inventories where cost
is determined by the LIFO method, the excess of the FIFO value
over the LIFO value was $20.8 million and
$30.8 million at December 31, 2009 and 2008,
respectively. The Company provides estimated inventory reserves
for slow-moving and obsolete inventory based on current
assessments about future demand, market conditions, customers
who may be experiencing financial difficulties and related
management initiatives.
Property,
Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures
for additions to plant facilities, or that extend their useful
lives, are capitalized. The cost of minor tools, jigs and dies,
and maintenance and repairs is charged to operations as
incurred. Depreciation of plant and equipment is calculated
principally on a straight-line basis over
46
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the estimated useful lives of the related assets. The range of
lives for depreciable assets is generally three to ten years for
machinery and equipment, five to 27 years for leasehold
improvements and 25 to 50 years for buildings.
Revenue
Recognition
The Company recognizes revenue on product sales in the period
when the sales process is complete. This generally occurs when
products are shipped to the customer in accordance with terms of
an agreement of sale, under which title and risk of loss have
been transferred, collectability is reasonably assured and
pricing is fixed or determinable. For a small percentage of
sales where title and risk of loss passes at point of delivery,
the Company recognizes revenue upon delivery to the customer,
assuming all other criteria for revenue recognition are met. The
policy, with respect to sales returns and allowances, generally
provides that the customer may not return products or be given
allowances, except at the Companys option. The Company has
agreements with distributors that do not provide expanded rights
of return for unsold products. The distributor purchases the
product from the Company, at which time title and risk of loss
transfers to the distributor. The Company does not offer
substantial sales incentives and credits to its distributors
other than volume discounts. The Company accounts for these
sales incentives as a reduction of revenues when the sale is
recognized in the income statement. Accruals for sales returns,
other allowances and estimated warranty costs are provided at
the time revenue is recognized based upon past experience. At
December 31, 2009, 2008 and 2007, the accrual for future
warranty obligations was $16.0 million, $16.1 million
and $14.4 million, respectively. The Companys expense
for warranty obligations was $8.2 million in 2009,
$12.2 million in 2008 and $11.3 million in 2007. The
warranty periods for products sold vary widely among the
Companys operations, but for the most part do not exceed
one year. The Company calculates its warranty expense provision
based on past warranty experience and adjustments are made
periodically to reflect actual warranty expenses.
Research
and Development
Company-funded research and development costs are charged to
operations as incurred and were $50.5 million in 2009,
$57.5 million in 2008 and $52.9 million in 2007.
Shipping
and Handling Costs
Shipping and handling costs are included in cost of sales and
were $24.6 million in 2009, $34.0 million in 2008 and
$27.5 million in 2007.
Earnings
Per Share
The calculation of basic earnings per share is based on the
weighted average number of common shares considered outstanding
during the periods. The calculation of diluted earnings per
share reflects the effect of all potentially dilutive securities
(principally outstanding common stock options and restricted
stock grants). The number of weighted average shares used in the
calculation of basic earnings per share and diluted earnings per
share were as follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Weighted average shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares
|
|
|
106,788
|
|
|
|
106,148
|
|
|
|
105,832
|
|
Stock option and awards plans
|
|
|
1,062
|
|
|
|
1,295
|
|
|
|
1,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares
|
|
|
107,850
|
|
|
|
107,443
|
|
|
|
107,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Financial
Instruments and Foreign Currency Translation
Assets and liabilities of foreign operations are translated
using exchange rates in effect at the balance sheet date and
their results of operations are translated using average
exchange rates for the year. Certain transactions of the Company
and its subsidiaries are made in currencies other than their
functional currency. Exchange gains and losses from those
transactions are included in operating results for the year.
The Company makes infrequent use of derivative financial
instruments. Forward contracts are entered into from time to
time to hedge specific firm commitments for certain inventory
purchases or export sales, thereby minimizing the Companys
exposure to raw material commodity price or foreign currency
fluctuation. No forward contracts were outstanding at
December 31, 2009 and 2008. During 2008, the Company was
party to certain commodity price forward contracts pertaining to
raw materials, which were not significant. These forward
contracts were acquired as a part of a 2008 acquisition. In
instances where transactions are designated as hedges of an
underlying item, the gains and losses on those transactions are
included in accumulated other comprehensive income
(AOCI) within stockholders equity to the
extent they are effective as hedges. The Company has designated
certain foreign-currency-denominated long-term debt as hedges of
the net investment in certain foreign operations. These net
investment hedges are the Companys
British-pound-denominated long-term debt and Euro-denominated
long-term debt, pertaining to certain European acquisitions
whose functional currencies are either the British pound or the
Euro. These acquisitions were financed by
foreign-currency-denominated borrowings under the Companys
revolving credit facility and were subsequently refinanced with
long-term private placement debt. These borrowings were designed
to create net investment hedges in each of the foreign
subsidiaries on their respective dates of acquisition. On the
respective dates of acquisition, the Company designated the
British pound- and Euro-denominated loans referred to above as
hedging instruments to offset foreign exchange gains or losses
on the net investment in the acquired business due to changes in
the British pound and Euro exchange rates. These net investment
hedges were evidenced by managements documentation
supporting the contemporaneous hedge designation on the
acquisition dates. Any gain or loss on the hedging instrument
following hedge designation (the debt), is reported in AOCI in
the same manner as the translation adjustment on the investment
based on changes in the spot rate, which is used to measure
hedge effectiveness. As of December 31, 2009 and 2008, all
net investment hedges were effective. At December 31, 2009,
the translation gains on the net carrying value of the
foreign-currency-denominated investments exceeded the
translation losses on the carrying value of the underlying debt
and the difference is included in AOCI. At December 31,
2008, the translation losses on the net carrying value of the
foreign-currency-denominated investments exceeded the
translation gains on the carrying value of the underlying debt
and the difference is included in AOCI. An evaluation of hedge
effectiveness is performed by the Company on an ongoing basis
and any changes in the hedge are made as appropriate. See
Note 4.
Share-Based
Compensation
The Company accounts for share-based payments in accordance with
Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC)
Compensation Stock Compensation Topic 718.
Accordingly, the Company expenses the fair value of awards made
under its share-based plans. That cost is recognized in the
consolidated financial statements over the requisite service
period of the grants. See Note 11.
Goodwill
and Other Intangible Assets
Goodwill and other intangible assets with indefinite lives,
primarily trademarks and trade names, are not amortized; rather,
they are tested for impairment at least annually.
The Company identifies its reporting units at the component
level, which is one level below our operating segments.
Generally, goodwill arises from acquisitions of specific
operating companies and is assigned to the reporting units based
upon the reporting unit in which that operating company resides.
Our reporting units are composed of the business units one level
below our operating segment at which discrete financial
information is prepared and regularly reviewed by segment
management.
48
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company principally relies on a discounted cash flow
analysis to determine the fair value of each reporting unit,
which considers forecasted cash flows discounted at an
appropriate discount rate. The Company believes that market
participants would use a discounted cash flow analysis to
determine the fair value of its reporting units in a sales
transaction. The annual goodwill impairment test requires the
Company to make a number of assumptions and estimates concerning
future levels of revenue growth, operating margins,
depreciation, amortization and working capital requirements,
which are based upon the Companys long range plan. The
Companys long range plan is updated as part of its annual
planning process and is reviewed and approved by management. The
discount rate is an estimate of the overall after-tax rate of
return required by a market participant whose weighted average
cost of capital includes both equity and debt, including a risk
premium. While the Company uses the best available information
to prepare its cash flow and discount rate assumptions, actual
future cash flows or market conditions could differ
significantly resulting in future impairment charges related to
recorded goodwill balances.
The impairment test for indefinite-lived intangibles other than
goodwill (primarily trademarks and trade names) consists of a
comparison of the fair value of the indefinite-lived intangible
asset to the carrying value of the asset as of the impairment
testing date. The Company estimates the fair value of its
indefinite-lived intangibles using the relief from royalty
method. The relief from royalty method is measured as the
discounted cash flow savings realized from owning such
trademarks and trade names and not having to pay a royalty for
their use.
The Company completed its required annual impairment tests in
the fourth quarter of 2009, 2008 and 2007 and determined that
the carrying values of goodwill and other intangible assets with
indefinite lives were not impaired.
The Company evaluates impairment of its long-lived assets, other
than goodwill and indefinite-lived intangible assets when events
or changes in circumstances indicate the carrying value may not
be recoverable. The carrying value of a long-lived asset group
is considered impaired when the total projected undiscounted
cash flows from such asset group are separately identifiable and
are less than the carrying value. In that event, a loss is
recognized based on the amount by which the carrying value
exceeds the fair market value of the long-lived asset group.
Fair market value is determined primarily using present value
techniques based on projected cash flows from the asset group.
Losses on long-lived assets
held-for-sale,
other than goodwill and indefinite-lived intangible assets, are
determined in a similar manner, except that fair market values
are reduced for disposal costs.
Intangible assets, other than goodwill, with definite lives are
amortized over their estimated useful lives. Patents are being
amortized over useful lives of four to 20 years. Customer
relationships are being amortized over a period of two to
20 years. Miscellaneous other intangible assets are being
amortized over a period of four to 20 years. The Company
periodically evaluates the reasonableness of the estimated
useful lives of these intangible assets.
Income
Taxes
The Companys annual provision for income taxes and
determination of the related balance sheet accounts requires
management to assess uncertainties, make judgments regarding
outcomes and utilize estimates. The Company conducts a broad
range of operations around the world and is therefore subject to
complex tax regulations in numerous international taxing
jurisdictions, resulting at times in tax audits, disputes and
potential litigation, the outcome of which is uncertain.
Management must make judgments currently about such
uncertainties and determine estimates of the Companys tax
assets and liabilities. To the extent the final outcome differs,
future adjustments to the Companys tax assets and
liabilities may be necessary. The Company recognizes interest
and penalties accrued related to uncertain tax positions in
income tax expense.
The Company also is required to assess the realizability of its
deferred tax assets, taking into consideration the
Companys forecast of future taxable income, the reversal
of other existing temporary differences, available net operating
loss carryforwards and available tax planning strategies that
could be implemented to realize the deferred tax assets. Based
on this assessment, management must evaluate the need for, and
amount of, valuation allowances against the Companys
deferred tax assets. To the extent facts and circumstances
change in the future, adjustments to the valuation allowances
may be required.
49
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
2.
|
Recently
Issued Financial Accounting Standards
|
In January 2010, the FASB issued Accounting Standards Update
(ASU)
No. 2010-06,
Fair value Measurements and Disclosures (ASU
2010-06).
ASU 2010-06
provides amendments that clarify existing disclosures and
require new disclosures related to fair value measurements,
particularly to provide greater disaggregated information on
each class of assets and liabilities and more robust disclosures
on transfers between levels 1 and 2 and activity in
level 3 fair value measurements. The new disclosures and
clarifications of existing disclosures are effective for interim
and annual reporting periods beginning after December 15,
2009, except for the disclosures about activity in level 3
fair value measurements. Those disclosures are effective for
fiscal years beginning after December 15, 2010 and for
interim periods within those fiscal years. The Company is
currently evaluating the impact of adopting ASU
2010-06 on
our fair value measurement disclosures.
In October 2009, the FASB issued ASU
No. 2009-14,
Certain Revenue Arrangements That Include Software Elements
(ASU
2009-14).
ASU 2009-14
provides guidance for revenue arrangements that include both
tangible products and software elements that are essential
to the functionality of the hardware. ASU
2009-14
provides factors to help constituents determine what software
elements are considered essential to the functionality of the
tangible product. This guidance will now subject
software-enabled products to other revenue guidance and
disclosure requirements, such as guidance surrounding revenue
arrangements with multiple-deliverables. ASU
2009-14 is
effective for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15,
2010 and is not expected to have a significant impact on the
Companys consolidated results of operations, financial
position and cash flows.
In October 2009, the FASB issued ASU
No. 2009-13,
Multiple-Deliverable Revenue Arrangements (ASU
2009-13).
ASU 2009-13
provides guidance on accounting and reporting for arrangements
including multiple revenue-generating activities. ASU
2009-13
provides guidance for separating deliverables, measuring and
allocating arrangement consideration to one or more units of
accounting. ASU
2009-13 also
requires significantly expanded disclosures to provide
information about a vendors multiple-deliverable revenue
arrangements and the judgments made by the vendor that affect
the timing or amount of revenue recognition. ASU
2009-13 is
effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after
June 15, 2010 and is not expected to have a significant
impact on the Companys consolidated results of operations,
financial position and cash flows.
In August 2009, the FASB issued ASU
No. 2009-05,
Measuring Liabilities at Fair Value (ASU
2009-05),
which provides clarification on the application of fair value
techniques when a quoted price in an active market for the
identical liability is not available and clarifies that when
estimating the fair value of a liability, the fair value is not
adjusted to reflect the impact of contractual restrictions that
prevent its transfer. ASU
2009-05 was
effective on October 1, 2009 for the Company and the
adoption did not have a significant impact on the Companys
consolidated results of operations, financial position and cash
flows.
In June 2009, the FASB issued Financial Accounting Standards
(SFAS) No. 168, The FASB Accounting
Standards
Codificationtm
and the Hierarchy of Generally Accepted Accounting Principles
a replacement of FASB Statement No. 162
(SFAS 168). SFAS 168 identifies the
sources of accounting principles and the framework for selecting
the principles used in the preparation of financial statements
of nongovernmental entities that are presented in conformity
with GAAP in the United States (the GAAP hierarchy).
Rules and interpretive releases of the Securities and Exchange
Commission (SEC) under authority of federal
securities laws are also sources of authoritative GAAP for SEC
registrants. SFAS 168 was effective for financial
statements issued for interim and annual periods ending after
September 15, 2009. The adoption of SFAS 168 did not
have an impact on the Companys consolidated results of
operations, financial position and cash flows.
In May 2009, the FASB issued ASC Subsequent Events Topic 855,
(ASC 855). ASC 855 establishes general standards of
accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or
are available to be issued. ASC 855 was effective for interim
and annual reporting periods
50
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
ending after June 15, 2009. The adoption of ASC 855 did not
have an impact on the Companys consolidated results of
operations, financial position and cash flows. The Company
evaluated all events and transactions that occurred after
December 31, 2009 up through February 25, 2010, the
date the Company issued these financial statements. During this
period, the Company did not have any material recognizable or
non-recognizable subsequent events.
The Company accounts for business combinations in accordance
with FASB ASC Business Combinations Topic 805 (ASC
805), which includes provisions adopted effective
January 1, 2009. The accounting for business combinations
retains the underlying concepts of the previously issued
standard, but changes the method of applying the acquisition
method in a number of significant aspects. These changes were
effective on a prospective basis for business combinations for
which the acquisition date is on or after January 1, 2009,
with the exception of the accounting for valuation allowances on
deferred taxes and acquired tax contingencies. Adjustments for
valuation allowances on deferred taxes and acquired tax
contingencies associated with acquisitions that closed prior to
January 1, 2009 would also apply the revised accounting for
business combination provisions. The adoption of certain
provisions within ASC 805 effective January 1, 2009 did not
have a significant impact on the Companys consolidated
results of operations, financial position or cash flows.
However, depending on the nature of an acquisition or the
quantity of acquisitions entered into after the adoption, ASC
805 may significantly impact the Companys
consolidated results of operations, financial position or cash
flows and result in more earnings volatility and generally lower
earnings due to, among other items, the expensing of transaction
costs and restructuring costs of acquired companies.
In April 2009, the FASB issued ASC
820-10-65-4,
Transition Related to FASB Staff Position
FAS 157-4,
Determining Fair Value When the Volume and Level of Activity for
the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly (ASC
820-10-65-4).
ASC
820-10-65-4
amends ASC 820, and provides additional guidance for estimating
fair value in accordance with ASC 820 when the volume and level
of activity for the asset or liability have significantly
decreased and also includes guidance on identifying
circumstances that indicate a transaction is not orderly for
fair value measurements. ASC
820-10-65-4
is applied prospectively with retrospective application not
permitted. ASC
820-10-65-4
was effective for interim and annual periods ending after
June 15, 2009. The adoption of ASC
820-10-65-4
did not have an impact on the Companys consolidated
results of operations, financial position and cash flows.
In April 2009, the FASB issued ASC
320-10-65-1,
Transition Related to FASB Staff Position
FAS 115-2
and
FAS 124-2,
Recognition and Presentation of
Other-Than-Temporary
Impairments (ASC
320-10-65-1).
ASC 320-10-65-1
amends previously issued standards to make the
other-than-temporary
impairments guidance more operational and to improve the
presentation of
other-than-temporary
impairments in the financial statements.
ASC 320-10-65-1
replaces the existing requirement that the entitys
management assert it has both the intent and ability to hold an
impaired debt security until recovery with a requirement that
management assert it does not have the intent to sell the
security, and it is more likely than not it will not have to
sell the security before recovery of its cost basis. ASC
320-10-65-1
provides increased disclosure about the credit and noncredit
components of impaired debt securities that are not expected to
be sold and also requires increased and more frequent
disclosures regarding expected cash flows, credit losses and an
aging of securities with unrealized losses. Although ASC
320-10-65-1
does not result in a change in the carrying amount of debt
securities, it does require that the portion of an
other-than-temporary
impairment not related to a credit loss for a
held-to-maturity
security be recognized in a new category of other comprehensive
income and be amortized over the remaining life of the debt
security as an increase in the carrying value of the security.
ASC
320-10-65-1
was effective for interim and annual periods ending after
June 15, 2009. The adoption of ASC
320-10-65-1
did not have an impact on the Companys consolidated
results of operations, financial position and cash flows.
In April 2009, the FASB issued ASC
825-10-65-1,
Transition Related to FASB Staff Position
FAS 107-1
and Accounting Principles Board
28-1,
Interim Disclosures about Fair Value of Financial Instruments
(ASC
825-10-65-1).
ASC
825-10-65-1
amends previously issued standards to require disclosures about
fair value of financial instruments not measured on the balance
sheet at fair value in interim financial statements as well as
in annual financial statements. Prior
51
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
to ASC
825-10-65-1,
fair values for these assets and liabilities were only disclosed
annually. ASC
825-10-65-1
applies to all financial instruments within the scope of ASC 825
and requires all entities to disclose the methods and
significant assumptions used to estimate the fair value of
financial instruments. ASC
825-10-65-1
was effective for interim periods ending after June 15,
2009. See Note 15.
3. Fair
Value Measurement
Fair value is defined as the exchange price that would be
received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market
participants on the measurement date.
The Company adopted ASC 820 as of January 1, 2008, with the
exception of the application of the statement to nonfinancial
assets and nonfinancial liabilities that are measured or
disclosed at fair value on a non-recurring basis, which was
delayed by ASC
820-10-65-1,
Transition Related to FASB Staff Position
FAS 157-2,
Effective Date of FASB Statement No. 157, to fiscal
years beginning after November 15, 2008, which the Company
adopted January 1, 2009.
The Company utilizes a valuation hierarchy for disclosure of the
inputs to the valuations used to measure fair value. This
hierarchy prioritizes the inputs into three broad levels as
follows. Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities. Level 2
inputs are quoted prices for similar assets and liabilities in
active markets or inputs that are observable for the asset or
liability, either directly or indirectly through market
corroboration, for substantially the full term of the financial
instrument. Level 3 inputs are unobservable inputs based on
the Companys own assumptions used to measure assets and
liabilities at fair value. A financial asset or liabilitys
classification within the hierarchy is determined based on the
lowest level input that is significant to the fair value
measurement.
At December 31, 2009, $0.3 million of the
Companys cash and cash equivalents as well as
$5.0 million of marketable securities are valued as
level 1 investments. In addition, the Company held
$8.9 million of investments in fixed-income securities
valued as level 2 investments in the investments and other
assets line of the consolidated balance sheet. For the year
ended December 31, 2009, gains and losses on the
investments noted above were not significant.
In March 2008, the FASB issued ASC
815-10-65-1,
Transition and Effective Date Related to FASB Statement
No. 161, Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133
(ASC
815-10-65-1).
ASC
815-10-65-1
requires entities to provide enhanced disclosure about how and
why the entity uses derivative instruments, how the instruments
and related hedged items are accounted for under ASC 815, and
how the instruments and related hedged items affect the
financial position, results of operations and cash flows of the
entity.
The Company has designated certain foreign-currency-denominated
long-term debt as hedges of the net investment in certain
foreign operations. These net investment hedges are the
Companys British-pound-denominated long-term debt and
Euro-denominated long-term debt, pertaining to certain European
acquisitions whose functional currencies are either the British
pound or the Euro. These acquisitions were financed by
foreign-currency-denominated borrowings under the Companys
revolving credit facility and subsequently refinanced with
long-term private placement debt. These borrowings were designed
to create net investment hedges in each of the foreign
subsidiaries on their respective dates of acquisition. On the
respective dates of acquisition, the Company designated the
British pound- and Euro-denominated loans referred to above as
hedging instruments to offset foreign exchange gains or losses
on the net investment in the acquired business due to changes in
the British pound and Euro exchange rates. These net investment
hedges were evidenced by managements documentation
supporting the contemporaneous hedge designation on the
acquisition dates. Any gain or loss on the hedging instrument
52
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
following hedge designation (the debt), is reported in
accumulated other comprehensive income in the same manner as the
translation adjustment on the investment based on changes in the
spot rate, which is used to measure hedge effectiveness.
At December 31, 2009, the Company had $145.5 million
of British pound-denominated loans, which are designated as a
hedge against the net investment in foreign subsidiaries
acquired in 2004 and 2003. At December 31, 2008, the
Company had $189.7 million of British pound-denominated
loans, which were designated as a hedge against the net
investment in foreign subsidiaries acquired in 2008, 2004 and
2003. At December 31, 2009 and 2008, the Company had
$71.6 million and $69.8 million, respectively, of
Euro-denominated loans, which were designated as a hedge against
the net investment in a foreign subsidiary acquired in 2005. As
a result of these British pound- and Euro-denominated loans
being designated and effective as net investment hedges,
$15.9 million of currency remeasurement losses and
$55.6 million of currency remeasurement gains have been
included in the foreign currency translation component of other
comprehensive income at December 31, 2009 and 2008,
respectively.
|
|
5.
|
Fourth
Quarter of 2008 Restructuring Charges and Asset
Write-Downs
|
During the fourth quarter of 2008, the Company recorded pre-tax
charges totaling $40.0 million, which had the effect of
reducing net income by $27.3 million ($0.25 per diluted
share). These charges include restructuring costs for employee
reductions and facility closures ($32.6 million), as well
as asset write-downs ($7.4 million). The charges included
$30.1 million for severance costs for more than 10% of the
Companys workforce and $1.5 million for lease
termination costs associated with the closure of certain
facilities. Of the $40.0 million in charges,
$32.9 million of the restructuring charges and asset
write-downs were recorded in cost of sales and $7.1 million
of the restructuring charges and asset write-downs were recorded
in Selling, general and administrative expenses. The
restructuring charges and asset write-downs were reported in
2008 segment operating income as follows: $20.4 million in
Electronic Instruments Group (EIG),
$19.4 million in Electromechanical Group (EMG)
and $0.2 million in Corporate administrative and other
expenses. The restructuring costs for employee reductions and
facility closures relate to plans established by the Company in
2008 as part of cost reduction initiatives that were broadly
implemented across the Companys various businesses during
fiscal 2009. The restructuring costs resulted from the
consolidation of manufacturing facilities, the migration of
production to low cost locales and a general reduction in
workforce in response to lower levels of expected sales volumes
in certain of the Companys businesses.
The following table provides a rollforward of the accruals
established in the fourth quarter of 2008 for restructuring
charges and asset write-downs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility
|
|
|
Asset
|
|
|
|
|
|
|
Severance
|
|
|
Closures
|
|
|
Write-Downs
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Restructuring accruals at December 31, 2007
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Pre-tax charges
|
|
|
30.1
|
|
|
|
2.5
|
|
|
|
7.4
|
|
|
|
40.0
|
|
Utilization
|
|
|
|
|
|
|
(1.0
|
)
|
|
|
(7.4
|
)
|
|
|
(8.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring accruals at December 31, 2008
|
|
|
30.1
|
|
|
|
1.5
|
|
|
|
|
|
|
|
31.6
|
|
Utilization
|
|
|
(18.1
|
)
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
(18.3
|
)
|
Foreign currency translation and other
|
|
|
0.2
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring accruals at December 31, 2009
|
|
$
|
12.2
|
|
|
$
|
1.0
|
|
|
$
|
|
|
|
$
|
13.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company spent approximately $72.9 million in cash, net
of cash acquired, to acquire High Standard Aviation in January
2009, a small acquisition of two businesses in India, Unispec
Marketing Pvt. Ltd. and Thelsha
53
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Technical Services Pvt. Ltd., in September 2009 and Ameron
Global in December 2009. High Standard Aviation is a provider of
electrical and electromechanical, hydraulic and pneumatic repair
services to the aerospace industry. Ameron Global is a
manufacturer of highly engineered pressurized gas components and
systems for commercial and aerospace customers and is also a
leader in maintenance, repair and overhaul of fire suppression
and oxygen supply systems. High Standard Aviation and Ameron
Global are a part of EMG.
The operating results of the above acquisitions have been
included in the Companys consolidated results from the
respective dates of acquisitions.
The purchase price and initial recording of the transactions for
Ameron Global were based on preliminary valuation assessments
and are subject to change. The following table represents the
provisional allocation of the aggregate purchase price for the
net assets of the above acquisitions based on their estimated
fair value (in millions):
|
|
|
|
|
Property, plant and equipment
|
|
$
|
4.8
|
|
Goodwill
|
|
|
17.4
|
|
Other intangible assets
|
|
|
36.1
|
|
Net working capital and other
|
|
|
14.6
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
72.9
|
|
|
|
|
|
|
The amount allocated to goodwill is reflective of the benefits
the Company expects to realize from the acquisitions as High
Standard Aviation and Ameron Global broaden the global footprint
of AMETEKs aerospace maintenance, repair and overhaul
business. No goodwill recorded as part of the 2009 acquisitions
will be tax deductible in future years.
The Company is in the process of conducting third-party
valuations of certain tangible and intangible assets acquired.
Adjustments to the allocation of purchase price will be recorded
when this information is finalized. Therefore, the allocation of
the purchase price is subject to revision.
The valuations for the $36.1 million preliminarily assigned
to other intangible assets have been or are currently being
finalized by third-party appraisers. In connection with the
finalization of the 2008 acquisitions, $192.9 million was
assigned to intangible assets, which consists primarily of
patents, technology and customer relationships with estimated
useful lives ranging from five years to 20 years and
tradenames with indefinite lives.
In 2008, the Company spent a total of approximately
$463.0 million in cash, net of cash acquired, for six
acquisitions and one small technology line. The acquisitions
include Drake Air (Drake) and Motion Control Group
(MCG) in February 2008, Reading Alloys in April
2008, Vision Research, Inc. in June 2008, the programmable power
business of Xantrex Technology, Inc. (Xantrex
Programmable) in August 2008 and Muirhead Aerospace
Limited (Muirhead) in November 2008. Drake is a
provider of heat-transfer repair services to the commercial
aerospace industry and further expands the Companys
presence in the global aerospace maintenance, repair and
overhaul (MRO) services industry. MCG is a leading
global manufacturer of highly customized motors and motion
control solutions for the medical, life sciences, industrial
automation, semiconductor and aviation markets. MCG enhances the
Companys capability in providing precision motion
technology solutions. Reading Alloys is a global leader in
specialty titanium master alloys and highly engineered metal
powders used in the aerospace, medical implant, military and
electronics markets. Vision Research is a leading manufacturer
of high-speed digital imaging systems used for motion capture
and analysis in numerous test and measurement applications.
Xantrex Programmable is a leader in alternating current and
direct current programmable power supplies used to test
electrical and electronic products. Muirhead is a leading
manufacturer of motion technology products and a provider of
avionics repair and overhaul services for the aerospace and
defense markets. Drake, MCG, Reading Alloys and Muirhead are
part of EMG and Vision Research and Xantrex Programmable are
part of EIG.
54
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Had the 2009 acquisitions been made at the beginning of 2009,
unaudited pro forma net sales, net income and diluted earnings
per share for the year ended December 31, 2009 would not
have been materially different than the amounts reported.
Had the 2009 acquisitions and the 2008 acquisitions been made at
the beginning of 2008, unaudited pro forma net sales, net income
and diluted earnings per share would have been as follows:
|
|
|
|
|
|
|
Year Ended December 31, 2008
|
|
|
|
(In millions, except per share amount)
|
|
|
Net sales
|
|
$
|
2,734.6
|
|
Net income
|
|
$
|
255.5
|
|
Diluted earnings per share
|
|
$
|
2.38
|
|
Pro forma results are not necessarily indicative of the results
that would have occurred if the acquisitions had been completed
at the beginning of 2008.
In 2007, the Company spent $300.6 million in cash, net of
cash acquired, for seven acquisitions and one small technology
line. The acquisitions include Seacon Phoenix, subsequently
renamed AMETEK SCP, Inc. (SCP), in April 2007,
Advanced Industries, Inc. (Advanced), B&S
Aircraft Parts and Accessories (B&S) and
Hamilton Precision Metals (Hamilton) in June 2007,
Cameca SAS (Cameca) in August 2007, the
Repair & Overhaul Division of Umeco plc (Umeco
R&O) in November 2007 and California Instruments
Corporation (California Instruments) in December
2007. SCP provides undersea electrical interconnect subsystems
to the global submarine market. Advanced manufactures starter
generators, brush and brushless motors, vane-axial centrifugal
blowers for cabin ventilation and linear actuators for the
business jet, light jet and helicopter markets. B&S
provides third-party MRO services, primarily for starter
generators and hydraulic and fuel system components, for a
variety of business aircraft and helicopter applications.
Hamilton produces highly differentiated niche specialty metals
used in medical implant devices and surgical instruments,
electronic components and measurement devices for aerospace and
other industrial markets. Cameca is a manufacturer of high-end
elemental analysis systems used in advanced laboratory research,
semiconductor and nanotechnology applications. Umeco R&O
provides third-party MRO services for a variety of helicopters
and commercial and regional aircraft throughout Europe.
California Instruments is a leader in the niche market for
programmable alternating current power sources used to test
electrical and electronic products, with an especially strong
position in the high-power segment. Advanced, B&S, Cameca
and California Instruments are part of EIG and SCP, Hamilton and
Umeco R&O are part of EMG.
55
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
7.
|
Goodwill
and Other Intangible Assets
|
The changes in the carrying amounts of goodwill by segment were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EIG
|
|
|
EMG
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Balance at December 31, 2007
|
|
$
|
622.0
|
|
|
$
|
423.7
|
|
|
$
|
1,045.7
|
|
Goodwill acquired during the year
|
|
|
164.6
|
|
|
|
106.5
|
|
|
|
271.1
|
|
Purchase price allocation adjustments and other*
|
|
|
(4.1
|
)
|
|
|
(2.0
|
)
|
|
|
(6.1
|
)
|
Foreign currency translation adjustments
|
|
|
(45.3
|
)
|
|
|
(25.3
|
)
|
|
|
(70.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
737.2
|
|
|
|
502.9
|
|
|
|
1,240.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill acquired during the year
|
|
|
2.5
|
|
|
|
14.9
|
|
|
|
17.4
|
|
Purchase price allocation adjustments and other*
|
|
|
(8.7
|
)
|
|
|
1.1
|
|
|
|
(7.6
|
)
|
Foreign currency translation adjustments
|
|
|
15.9
|
|
|
|
11.5
|
|
|
|
27.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
746.9
|
|
|
$
|
530.4
|
|
|
$
|
1,277.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Purchase price allocation adjustments reflect final purchase
price allocations and revisions to certain preliminary
allocations for recent acquisitions, which include
reclassifications between goodwill and other intangible assets. |
Other intangible assets were as follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Definite-lived intangible assets (subject to amortization):
|
|
|
|
|
|
|
|
|
Patents
|
|
$
|
54,150
|
|
|
$
|
51,021
|
|
Purchased technology
|
|
|
75,564
|
|
|
|
69,041
|
|
Customer lists
|
|
|
319,820
|
|
|
|
203,335
|
|
Other acquired intangibles
|
|
|
25,111
|
|
|
|
38,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
474,645
|
|
|
|
361,838
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization:
|
|
|
|
|
|
|
|
|
Patents
|
|
|
(27,099
|
)
|
|
|
(25,250
|
)
|
Purchased technology
|
|
|
(24,442
|
)
|
|
|
(22,870
|
)
|
Customer lists
|
|
|
(51,596
|
)
|
|
|
(23,331
|
)
|
Other acquired intangibles
|
|
|
(19,772
|
)
|
|
|
(26,468
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(122,909
|
)
|
|
|
(97,919
|
)
|
|
|
|
|
|
|
|
|
|
Net intangible assets subject to amortization
|
|
|
351,736
|
|
|
|
263,919
|
|
Indefinite-lived intangible assets (not subject to amortization):
|
|
|
|
|
|
|
|
|
Trademarks and trade names
|
|
|
170,152
|
|
|
|
177,866
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
521,888
|
|
|
$
|
441,785
|
|
|
|
|
|
|
|
|
|
|
Amortization expense was $23.3 million, $17.5 million
and $10.4 million for the years ended December 31,
2009, 2008 and 2007, respectively. Amortization expense for each
of the next five years is expected to approximate
$23.9 million per year, not considering the impact of
potential future acquisitions.
56
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
8.
|
Other
Consolidated Balance Sheet Information
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
INVENTORIES
|
|
|
|
|
|
|
|
|
Finished goods and parts
|
|
$
|
46,777
|
|
|
$
|
66,416
|
|
Work in process
|
|
|
65,752
|
|
|
|
81,282
|
|
Raw materials and purchased parts
|
|
|
199,013
|
|
|
|
201,811
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
311,542
|
|
|
$
|
349,509
|
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
30,792
|
|
|
$
|
27,342
|
|
Buildings
|
|
|
204,447
|
|
|
|
199,696
|
|
Machinery and equipment
|
|
|
635,463
|
|
|
|
612,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
870,702
|
|
|
|
839,512
|
|
Less: Accumulated depreciation
|
|
|
(560,649
|
)
|
|
|
(531,604
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
310,053
|
|
|
$
|
307,908
|
|
|
|
|
|
|
|
|
|
|
ACCRUED LIABILITIES
|
|
|
|
|
|
|
|
|
Accrued employee compensation and benefits
|
|
$
|
41,670
|
|
|
$
|
59,915
|
|
Severance and lease termination accruals
|
|
|
23,129
|
|
|
|
46,863
|
|
Other
|
|
|
68,558
|
|
|
|
86,906
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
133,357
|
|
|
$
|
193,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
ALLOWANCES FOR POSSIBLE LOSSES ON ACCOUNTS AND
NOTES RECEIVABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year
|
|
$
|
8,489
|
|
|
$
|
6,393
|
|
|
$
|
7,387
|
|
Additions charged to expense
|
|
|
1,139
|
|
|
|
5,648
|
|
|
|
663
|
|
Recoveries credited to allowance
|
|
|
70
|
|
|
|
10
|
|
|
|
22
|
|
Write-offs
|
|
|
(4,520
|
)
|
|
|
(2,878
|
)
|
|
|
(2,122
|
)
|
Currency translation adjustments and other
|
|
|
610
|
|
|
|
(684
|
)
|
|
|
443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
$
|
5,788
|
|
|
$
|
8,489
|
|
|
$
|
6,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Long-term debt consisted of the following at December 31:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
U.S. dollar 6.59% senior notes due September 2015
|
|
$
|
90,000
|
|
|
$
|
90,000
|
|
U.S. dollar 6.69% senior notes due December 2015
|
|
|
35,000
|
|
|
|
35,000
|
|
U.S. dollar 6.20% senior notes due December 2017
|
|
|
270,000
|
|
|
|
270,000
|
|
U.S. dollar 6.35% senior notes due July 2018
|
|
|
80,000
|
|
|
|
80,000
|
|
U.S. dollar 7.08% senior notes due September 2018
|
|
|
160,000
|
|
|
|
160,000
|
|
U.S. dollar 7.18% senior notes due December 2018
|
|
|
65,000
|
|
|
|
65,000
|
|
U.S. dollar 6.30% senior notes due December 2019
|
|
|
100,000
|
|
|
|
100,000
|
|
British pound 5.96% senior note due September 2010
|
|
|
80,815
|
|
|
|
72,960
|
|
British pound floating-rate term note due through December 2010
|
|
|
|
|
|
|
16,416
|
|
Euro 3.94% senior note due August 2015
|
|
|
71,582
|
|
|
|
69,842
|
|
British pound 5.99% senior note due November 2016
|
|
|
64,652
|
|
|
|
58,369
|
|
Revolving credit loan
|
|
|
|
|
|
|
65,569
|
|
Other, principally foreign
|
|
|
24,632
|
|
|
|
28,525
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
1,041,681
|
|
|
|
1,111,681
|
|
Less: Current portion
|
|
|
(85,801
|
)
|
|
|
(18,438
|
)
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
955,880
|
|
|
$
|
1,093,243
|
|
|
|
|
|
|
|
|
|
|
Maturities of long-term debt outstanding at December 31,
2009 were as follows: $1.9 million in 2011;
$3.6 million in 2012; $2.4 million in 2013;
$1.8 million in 2014; $198.1 million in 2015; and
$748.1 million in 2016 and thereafter.
In the fourth quarter of 2009, the Company paid in full a
10.5 million British pound ($16.9 million)
floating-rate term note.
In the second quarter of 2009, the Company paid in full a
40 million British pound ($62.0 million) borrowing
under the revolving credit facility.
In July 2008, the Company paid in full the $225 million
7.20% senior notes due July 2008 using the proceeds from
borrowings under its existing revolving credit facility.
The second funding of the third quarter of 2007 private
placement agreement to sell $450 million occurred in July
2008 for $80 million in aggregate principal amount of
6.35% senior notes due July 2018. The 2007 private
placement carries a weighted average interest rate of 6.25%. The
proceeds from the second funding of the notes were used to pay
down a portion of the Companys revolving credit facility.
In the third quarter of 2008, the Company completed a private
placement agreement to sell $350 million in senior notes to
a group of institutional investors. There were two funding dates
for the senior notes. The first funding occurred in September
2008 for $250 million, consisting of $90 million in
aggregate principal amount of 6.59% senior notes due
September 2015 and $160 million in aggregate principal
amount of 7.08% senior notes due September 2018. The second
funding date occurred in December 2008 for $100 million,
consisting of $35 million in aggregate principal amount of
6.69% senior notes due December 2015 and $65 million
in aggregate principal amount of 7.18% senior notes due
December 2018. The senior notes carry a weighted average
interest rate of 6.93%. The proceeds from the senior notes were
used to pay down a portion of the Companys revolving
credit facility.
58
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In September 2005, the Company issued a 50 million Euro
($71.6 million at December 31,
2009) 3.94% senior note due August 2015. In November
2004, the Company issued a 40 million British pound
($64.7 million at December 31,
2009) 5.99% senior note due in November 2016. In
September 2003, the Company issued a 50 million British
pound ($80.8 million at December 31,
2009) 5.96% senior note due in September 2010.
The Company had an accounts receivable securitization facility
agreement with a wholly owned, special-purpose subsidiary and
the special-purpose subsidiary had a receivables sale agreement
with a bank, whereby it could sell to a third party up to
$100.0 million of its trade accounts receivable on a
revolving basis. The securitization facility was a financing
vehicle utilized by the Company previously because it offered
attractive rates relative to other financing sources. When
borrowings were outstanding under the facility, all securitized
accounts receivable and related debt were reflected on the
Companys consolidated balance sheet.
The special-purpose subsidiary was the servicer of the accounts
receivable under the securitization facility. The accounts
receivable securitization facility was not renewed by the
Company in May 2009. Interest rates on amounts drawn down were
based on prevailing market rates for short-term commercial paper
plus a program fee. The Company also paid a commitment fee on
any unused commitments under the securitization facility. The
Companys accounts receivable securitization was accounted
for as a secured borrowing.
At December 31, 2008, the Company had no borrowings
outstanding on the accounts receivable securitization. Interest
expense under this facility was not significant. The weighted
average interest rate when borrowings were outstanding under the
accounts receivable securitization during 2008 was 3.6%.
The Companys revolving credit facilitys total
borrowing capacity is $550 million, which includes an
accordion feature that permits the Company to request up to an
additional $100 million in revolving credit commitments at
any time during the life of the revolving credit agreement under
certain conditions. The term of the facility is June 2012.
The revolving credit facility places certain restrictions on
allowable additional indebtedness. At December 31, 2009,
the Company had available borrowing capacity of
$532.2 million under its $550 million revolving bank
credit facility, which includes an accordion feature allowing
$100 million of additional borrowing capacity.
Interest rates on outstanding loans under the revolving credit
facility are at the applicable London Interbank Offered Rate
(LIBOR) rate plus a negotiated spread, or at the
U.S. prime rate. At December 31, 2009, the Company had
no borrowings outstanding under the revolving credit facility.
At December 31, 2008, the Company had $65.6 million
borrowings outstanding under the revolving credit facility, of
which $58.4 million related to 40 million of British
pound borrowings under the revolver. The weighted average
interest rate on the revolving credit facility for the years
ended December 31, 2009 and 2008 was 0.60% and 2.81%,
respectively. The Company had outstanding letters of credit
totaling $19.8 million and $15.5 million at
December 31, 2009 and 2008, respectively.
The private placement, the floating-rate term loan, the senior
notes and the revolving credit facility are subject to certain
customary covenants, including financial covenants that, among
other things, require the Company to maintain certain
debt-to-EBITDA
and interest coverage ratios. The Company was in compliance with
all provisions of the debt arrangements at December 31,
2009.
Foreign subsidiaries of the Company had available credit
facilities with local foreign lenders of $50.3 million at
December 31, 2009. Foreign subsidiaries had debt
outstanding at December 31, 2009 totaling
$24.6 million, including $19.6 million reported in
long-term debt.
The weighted average interest rate on total debt outstanding at
December 31, 2009 and 2008 was 6.4% and 6.2%, respectively.
59
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On both January 24, 2008 and July 23, 2008, the Board
of Directors authorized increases of $50 million for the
repurchase of common stock for a total of $100 million in
2008. These increases were added to the $25.9 million that
remained available at December 31, 2007 from an existing
$50 million authorization approved in March 2003. The
Company did not repurchase shares in 2009. In 2008, the Company
repurchased approximately 1,263,000 shares of common stock
for $57.4 million in cash under its current share
repurchase authorization. At December 31, 2009,
$68.5 million of the current share repurchase authorization
remained available. On January 28, 2010, the Board of
Directors authorized an increase of $75 million in the
authorization for the repurchase of its common stock. This
increase was added to the $68.5 million that remained
available from existing $100 million authorizations
approved in 2008, for a total of $143.5 million available
for repurchases of the Companys common stock. Subsequent
to December 31, 2009, the Company repurchased 1,128,200
shares of its common stock for approximately $41.8 million.
The remaining balance available for repurchases of the
Companys common stock is $101.7 million as of the
filing of this report.
At December 31, 2009, the Company held 3.1 million
shares in its treasury at a cost of $83.3 million, compared
with 3.5 million shares at a cost of $92.0 million at
December 31, 2008. The number of shares outstanding at
December 31, 2009 was 107.9 million shares, compared
with 106.7 million shares at December 31, 2008.
The Company has a Shareholder Rights Plan, under which the
Companys Board of Directors declared a dividend of one
Right for each share of Company common stock owned at the close
of business on June 2, 2007, and has authorized the
issuance of one Right for each share of common stock of the
Company issued between the Record Date and the Distribution
Date. The Plan provides, under certain conditions involving
acquisition of the Companys common stock, that holders of
Rights, except for the acquiring entity, would be entitled
(i) to purchase shares of preferred stock at a specified
exercise price, or (ii) to purchase shares of common stock
of the Company, or the acquiring company, having a value of
twice the Rights exercise price. The Rights under the Plan
expire in June 2017.
|
|
11.
|
Share-Based
Compensation
|
Under the terms of the Companys stockholder-approved
share-based plans, incentive and non-qualified stock options and
restricted stock awards have been, and may be, issued to the
Companys officers, management-level employees and members
of its Board of Directors. Employee and non-employee director
stock options generally vest at a rate of 25% per year,
beginning one year from the date of the grant, and restricted
stock awards generally have a four-year cliff vesting. Options
primarily have a maximum contractual term of seven years. At
December 31, 2009, 6.9 million shares of Company
common stock were reserved for issuance under the Companys
share-based plans, including 4.4 million shares for stock
options outstanding.
The Company issues previously unissued shares when options are
exercised and shares are issued from treasury stock upon the
award of restricted stock.
The Company measures and records compensation expense related to
all stock awards by recognizing the grant date fair value of the
awards over their requisite service periods in the financial
statements. For grants under any of the Companys plans
that are subject to graded vesting over a service period, the
Company recognizes expense on a straight-line basis over the
requisite service period for the entire award.
60
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The fair value of each option grant is estimated on the date of
grant using a Black-Scholes-Merton option pricing model. The
following weighted average assumptions were used in the
Black-Scholes-Merton model to estimate the fair values of
options granted during the years indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Expected stock volatility
|
|
|
25.8
|
%
|
|
|
18.4
|
%
|
|
|
22.4
|
%
|
Expected life of the options (years)
|
|
|
4.9
|
|
|
|
4.7
|
|
|
|
4.7
|
|
Risk-free interest rate
|
|
|
1.89
|
%
|
|
|
2.60
|
%
|
|
|
4.53
|
%
|
Expected dividend yield
|
|
|
0.73
|
%
|
|
|
0.49
|
%
|
|
|
0.66
|
%
|
Black-Scholes-Merton fair value per option granted
|
|
$
|
7.80
|
|
|
$
|
9.58
|
|
|
$
|
9.58
|
|
Expected stock volatility is based on the historical volatility
of the Companys stock. The Company used historical
exercise data to estimate the options expected life, which
represents the period of time that the options granted are
expected to be outstanding. Management anticipates that the
future option holding periods will be similar to the historical
option holding periods. The risk-free interest rate for periods
within the contractual life of the option is based on the
U.S. Treasury yield curve at the time of grant.
Compensation expense recognized for all share-based awards is
net of estimated forfeitures. The Companys estimated
forfeiture rates are based on its historical experience.
Total share-based compensation expense was as follows for the
years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Stock option expense
|
|
$
|
6,297
|
|
|
$
|
6,300
|
|
|
$
|
5,884
|
|
Restricted stock expense
|
|
|
7,205
|
|
|
|
13,886
|
|
|
|
9,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pre-tax expense
|
|
|
13,502
|
|
|
|
20,186
|
|
|
|
15,530
|
|
Related tax benefit
|
|
|
(4,223
|
)
|
|
|
(3,990
|
)
|
|
|
(4,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction of net income
|
|
$
|
9,279
|
|
|
$
|
16,196
|
|
|
$
|
11,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax share-based compensation expense is included in either
cost of sales, or selling, general and administrative expenses,
depending on where the recipients cash compensation is
reported.
The following is a summary of the Companys stock option
activity and related information for the year ended
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Life
|
|
|
Intrinsic Value
|
|
|
|
(In thousands)
|
|
|
|
|
|
(Years)
|
|
|
(In millions)
|
|
|
Outstanding at the beginning of the year
|
|
|
4,035
|
|
|
$
|
28.01
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,320
|
|
|
|
32.72
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(812
|
)
|
|
|
14.50
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(75
|
)
|
|
|
38.33
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(62
|
)
|
|
|
40.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at the end of the year
|
|
|
4,406
|
|
|
$
|
31.56
|
|
|
|
4.1
|
|
|
$
|
36.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at the end of the year
|
|
|
2,179
|
|
|
$
|
26.23
|
|
|
|
2.5
|
|
|
$
|
27.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of options exercised during 2009,
2008 and 2007 was $15.5 million, $13.3 million and
$32.2 million, respectively. The total fair value of the
stock options vested during 2009, 2008 and 2007 was
$5.4 million, $5.6 million and $5.7 million,
respectively.
61
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following is a summary of the status of the Companys
nonvested options outstanding for the year ended
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
|
|
|
|
Nonvested options outstanding at the beginning of the year
|
|
|
1,612
|
|
|
$
|
9.39
|
|
Granted
|
|
|
1,320
|
|
|
|
7.80
|
|
Vested
|
|
|
(630
|
)
|
|
|
9.11
|
|
Forfeited
|
|
|
(75
|
)
|
|
|
8.97
|
|
|
|
|
|
|
|
|
|
|
Nonvested options outstanding at the end of the year
|
|
|
2,227
|
|
|
$
|
8.54
|
|
|
|
|
|
|
|
|
|
|
Expected future pre-tax compensation expense relating to the
2.2 million nonvested options outstanding as of
December 31, 2009 is $13.1 million, which is expected
to be recognized over a weighted average period of approximately
two years.
The fair value of restricted shares under the Companys
restricted stock arrangement is determined by the product of the
number of shares granted and the grant date market price of the
Companys common stock. Upon the grant of restricted stock,
the fair value of the restricted shares (unearned compensation)
at the date of grant is charged as a reduction of capital in
excess of par value in the Companys consolidated balance
sheet and is amortized to expense on a straight-line basis over
the vesting period, which is the same as the calculated derived
service period as determined on the grant date.
Restricted stock awards are subject to accelerated vesting due
to certain events, including doubling of the grant price of the
Companys common stock as of the close of business during
any five consecutive trading days. On May 19, 2008, the
April 27, 2005 grant of 706,605 shares of restricted
stock vested under this accelerated vesting provision. The
pre-tax charge to income due to the accelerated vesting of these
shares was $7.8 million ($7.3 million net after-tax
charge) for the year ended December 31, 2008.
The following is a summary of the status of the Companys
nonvested restricted stock outstanding for the year ended
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
|
|
|
|
Nonvested restricted stock outstanding at the beginning of the
year
|
|
|
608
|
|
|
$
|
39.34
|
|
Granted
|
|
|
375
|
|
|
|
32.74
|
|
Vested
|
|
|
(23
|
)
|
|
|
31.58
|
|
Forfeited
|
|
|
(43
|
)
|
|
|
39.27
|
|
|
|
|
|
|
|
|
|
|
Nonvested restricted stock outstanding at the end of the year
|
|
|
917
|
|
|
$
|
36.95
|
|
|
|
|
|
|
|
|
|
|
The total fair value of the restricted stock that vested was
$17.8 million in 2008, and 2009 and 2007 were not
significant. The weighted average fair value of restricted stock
granted per share during 2009 and 2008 was $32.74 and $48.38,
respectively. Expected future pre-tax compensation expense
related to the 0.9 million nonvested restricted shares
outstanding as of December 31, 2009 is $17.8 million,
which is expected to be recognized over a weighted average
period of approximately two years.
Under a Supplemental Executive Retirement Plan
(SERP) in 2009, the Company reserved
14,214 shares of common stock. Reductions for retirements
and terminations were 30,036 shares in 2009. The total
number of shares of common stock reserved under the SERP was
266,310 as of December 31, 2009. Charges to expense under
the
62
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
SERP are not significant in amount and are considered pension
expense with the offsetting credit reflected in capital in
excess of par value.
|
|
12.
|
Leases
and Other Commitments
|
Minimum aggregate rental commitments under noncancellable leases
in effect at December 31, 2009 (principally for production
and administrative facilities and equipment) amounted to
$76.0 million, consisting of payments of $16.3 million
in 2010, $11.6 million in 2011, $8.9 million in 2012,
$6.1 million in 2013, $5.1 million in 2014 and
$28.0 million thereafter. Rental expense was
$22.8 million in 2009, $22.7 million in 2008 and
$19.1 million in 2007. The leases expire over a range of
years from 2010 to 2082, with renewal or purchase options,
subject to various terms and conditions, contained in most of
the leases.
The Company acquired a capital lease obligation in 2007 for land
and a building. The lease has a term of 12 years, which
began July 2006, and is payable quarterly. Property, plant and
equipment as of December 31, 2009 includes a building of
$13.2 million, net of $2.3 million of accumulated
depreciation and land of $2.1 million related to this
capital lease. Amortization of the leased assets of
$0.7 million is included in 2009 depreciation expense.
Future minimum lease payments are estimated to be
$0.9 million in each of the years 2010 through 2014 and
$9.4 million thereafter, for total minimum lease payments
of $13.9 million, net of interest.
As of December 31, 2009 and 2008, the Company had
$161.9 million and $219.9 million, respectively, in
purchase obligations outstanding, which primarily consisted of
contractual commitments to purchase certain inventories at fixed
prices.
The components of income before income taxes and the details of
the provision for income taxes were as follows for the years
ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
207,831
|
|
|
$
|
260,464
|
|
|
$
|
244,550
|
|
Foreign
|
|
|
86,802
|
|
|
|
105,752
|
|
|
|
91,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
294,633
|
|
|
$
|
366,216
|
|
|
$
|
336,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
58,247
|
|
|
$
|
52,581
|
|
|
$
|
66,386
|
|
Foreign
|
|
|
22,123
|
|
|
|
29,889
|
|
|
|
28,929
|
|
State
|
|
|
2,725
|
|
|
|
7,052
|
|
|
|
8,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
83,095
|
|
|
|
89,522
|
|
|
|
103,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
7,024
|
|
|
|
28,920
|
|
|
|
4,751
|
|
Foreign
|
|
|
(1,464
|
)
|
|
|
(1,378
|
)
|
|
|
(2,036
|
)
|
State
|
|
|
208
|
|
|
|
2,200
|
|
|
|
2,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
5,768
|
|
|
|
29,742
|
|
|
|
4,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision
|
|
$
|
88,863
|
|
|
$
|
119,264
|
|
|
$
|
108,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Significant components of deferred tax (asset) liability were as
follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Current deferred tax (asset) liability:
|
|
|
|
|
|
|
|
|
Reserves not currently deductible
|
|
$
|
(19,437
|
)
|
|
$
|
(20,885
|
)
|
Share-based compensation
|
|
|
(3,870
|
)
|
|
|
(1,984
|
)
|
Net operating loss carryforwards
|
|
|
(2,829
|
)
|
|
|
(1,107
|
)
|
Foreign tax credit carryforwards
|
|
|
(3,360
|
)
|
|
|
(3,360
|
)
|
Other
|
|
|
(1,173
|
)
|
|
|
(3,583
|
)
|
|
|
|
|
|
|
|
|
|
Net current deferred tax asset
|
|
$
|
(30,669
|
)
|
|
$
|
(30,919
|
)
|
|
|
|
|
|
|
|
|
|
Noncurrent deferred tax (asset) liability:
|
|
|
|
|
|
|
|
|
Differences in basis of property and accelerated depreciation
|
|
$
|
22,285
|
|
|
$
|
24,442
|
|
Reserves not currently deductible
|
|
|
(19,913
|
)
|
|
|
(17,815
|
)
|
Pensions
|
|
|
31,453
|
|
|
|
7,454
|
|
Differences in basis of intangible assets and accelerated
amortization
|
|
|
188,045
|
|
|
|
136,417
|
|
Net operating loss carryforwards
|
|
|
(6,513
|
)
|
|
|
(11,950
|
)
|
Share-based compensation
|
|
|
(9,893
|
)
|
|
|
(9,084
|
)
|
Other
|
|
|
(3,578
|
)
|
|
|
4,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
201,886
|
|
|
|
133,732
|
|
Less: Valuation allowance
|
|
|
4,468
|
|
|
|
11,209
|
|
|
|
|
|
|
|
|
|
|
Net noncurrent deferred tax liability
|
|
|
206,354
|
|
|
|
144,941
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
175,685
|
|
|
$
|
114,022
|
|
|
|
|
|
|
|
|
|
|
The Companys effective tax rate of the provision for
income taxes reconciles to the U.S. Federal statutory rate
as follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
U.S. Federal statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State income taxes, net of federal income tax benefit
|
|
|
0.4
|
|
|
|
1.5
|
|
|
|
1.9
|
|
Foreign operations, net*
|
|
|
(4.2
|
)
|
|
|
(3.0
|
)
|
|
|
(4.6
|
)
|
Other
|
|
|
(1.0
|
)
|
|
|
(0.9
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated effective tax rate
|
|
|
30.2
|
%
|
|
|
32.6
|
%
|
|
|
32.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes the effects of statutory tax rate reductions in Italy,
the United Kingdom and Germany during 2007. |
As of December 31, 2009, the Company had no provision for
U.S. deferred income taxes on the undistributed earnings of
its foreign subsidiaries, which total approximately
$395 million. If the Company were to distribute those
earnings to the United States, the Company would be subject to
U.S. income taxes based on the excess of the
U.S. statutory rate over statutory rates in the foreign
jurisdiction and withholding taxes payable to the various
foreign countries. Determination of the amount of the
unrecognized deferred income tax liability on these
undistributed earnings is not practicable.
At December 31, 2009, the Company had tax benefits of
$9.3 million related to net operating loss carryforwards,
which will be available to offset future income taxes payable,
subject to certain annual or other limitations based on foreign
and U.S. tax laws. This amount includes net operating loss
carryforwards of
64
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$3.7 million for federal income tax purposes with a
valuation allowance of $3.3 million, $3.6 million for
state income tax purposes with a valuation allowance of
$0.2 million, and $2.0 million for foreign locations
with no valuation allowance. These net operating loss
carryforwards, if not used, will expire between 2010 and 2032.
As of December 31, 2009, the Company had $3.4 million
of U.S. foreign tax credit carryforwards.
The Company maintains a valuation allowance to reduce certain
deferred tax assets to amounts that are more likely than not to
be realized. This allowance primarily relates to the deferred
tax assets established for net operating loss carryforwards. In
2009, the Company recorded a decrease of $6.7 million in
the valuation allowance primarily related to the utilization and
expiration of net operating loss carryforwards.
At December 31, 2009, the Company had gross unrecognized
tax benefits of $26.5 million, of which $25.6 million
would impact the effective tax rate if recognized. At
December 31, 2008, the Company had gross unrecognized tax
benefits of $18.6 million, all of which would impact the
effective tax rate if recognized.
The Company recognizes interest and penalties accrued related to
uncertain tax positions in income tax expense. At
December 31, 2009 and 2008, the Company reported
$5.5 million and $2.3 million, respectively, in the
aggregate related to interest and penalty exposure as accrued
income tax expense in the consolidated balance sheet. During
2009, 2008 and 2007, the Company recognized $0.7 million of
expense, $0.8 million of income and $1.5 million of
expense, respectively, of interest and penalties in the income
statement.
The most significant tax jurisdiction for the Company is the
United States. The Company files income tax returns in various
state and foreign tax jurisdictions, in some cases for multiple
legal entities per jurisdiction. Generally, the Company has open
tax years subject to tax audit on average of between three and
six years in these jurisdictions. In 2009, the Internal Revenue
Service (IRS) completed the examination of the
Companys U.S. income tax returns for 2005 and is
currently examining the Companys U.S. income tax
returns for 2006 and 2007. In 2009, the Company concluded an
exam in Germany for the period 2004 through 2006. The Company
has not materially extended any other statutes of limitation for
any significant location and has reviewed and accrued for, where
necessary, tax liabilities for open periods. Tax years in
certain state and foreign jurisdictions remain subject to
examination; however the uncertain tax positions related to
these jurisdictions are not considered material.
During 2009, the Company added $15.9 million of tax,
interest and penalties related to 2009 activity for identified
uncertain tax positions and reversed $4.8 million of tax
and interest related to statute expirations and settlement of
prior uncertain positions. During 2008, the Company added
$11.6 million of tax, interest and penalties related to
2008 activity for identified uncertain tax positions and
reversed $16.5 million of tax and interest related to
statute expirations and settlement of prior uncertain positions.
The following is a reconciliation of the liability for uncertain
tax positions at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Balance at the beginning of the year
|
|
$
|
18.6
|
|
|
$
|
22.7
|
|
|
$
|
24.9
|
|
Additions for tax positions related to the current year
|
|
|
8.8
|
|
|
|
0.9
|
|
|
|
1.3
|
|
Additions for tax positions of prior years
|
|
|
2.5
|
|
|
|
10.1
|
|
|
|
|
|
Reductions for tax positions of prior years
|
|
|
(1.4
|
)
|
|
|
(4.2
|
)
|
|
|
(3.2
|
)
|
Reductions related to settlements with taxing authorities
|
|
|
(2.0
|
)
|
|
|
(10.8
|
)
|
|
|
|
|
Reductions due to statute expirations
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
$
|
26.5
|
|
|
$
|
18.6
|
|
|
$
|
22.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The additions above primarily reflect the increase in tax
liabilities for uncertain tax positions related to certain
foreign activities and for research and development credits,
while the reductions above reflect the settlement of an IRS
audit and amended filings. At December 31, 2009, tax,
interest and penalties of $13.7 million are classified as a
65
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
noncurrent liability. The net increase in uncertain tax
positions for the year ending December 31, 2009 resulted in
an increase to income tax expense of $0.8 million.
|
|
14.
|
Retirement
Plans and Other Postretirement Benefits
|
Retirement
and Pension Plans
The Company sponsors several retirement and pension plans
covering eligible salaried and hourly employees. The plans
generally provide benefits based on participants years of
service
and/or
compensation. The following is a brief description of the
Companys retirement and pension plans.
The Company maintains contributory and noncontributory defined
benefit pension plans. Benefits for eligible salaried and hourly
employees under all defined benefit plans are funded through
trusts established in conjunction with the plans. The
Companys funding policy with respect to its defined
benefit plans is to contribute amounts that provide for benefits
based on actuarial calculations and the applicable requirements
of U.S. federal and local foreign laws. The Company
estimates that it will make both required and discretionary cash
contributions of approximately $3 million to
$5 million to its worldwide defined benefit pension plans
in 2010.
The Company uses a measurement date of December 31 (its fiscal
year end) for its U.S. and foreign defined benefit pension
plans.
The Company sponsors a 401(k) retirement and savings plan for
eligible U.S. employees. Participants in the savings plan
may contribute a portion of their compensation on a before-tax
basis. The Company matches employee contributions on a
dollar-for-dollar
basis up to six percent of eligible compensation or a maximum of
$1,200 per participant.
The Companys retirement and savings plan has a defined
contribution retirement feature principally to cover
U.S. salaried employees joining the Company after
December 31, 1996. Under the retirement feature, the
Company makes contributions for eligible employees based on a
pre-established percentage of the covered employees salary
subject to pre-established vesting. Employees of certain of the
Companys foreign operations participate in various local
defined contribution plans.
The Company also has a defined contribution retirement plan for
certain of its U.S. acquired businesses for the benefit of
eligible employees. Company contributions are made for each
participant up to a specified percentage, not to exceed six
percent of the participants base compensation.
The Company has nonqualified unfunded retirement plans for its
Directors and certain retired employees. It also provides
supplemental retirement benefits, through contractual
arrangements
and/or a
SERP covering certain current and former executives of the
Company. These supplemental benefits are designed to compensate
the executive for retirement benefits that would have been
provided under the Companys primary retirement plan,
except for statutory limitations on compensation that must be
taken into account under those plans. The projected benefit
obligations of the SERP and the contracts will primarily be
funded by a grant of shares of the Companys common stock
upon retirement or termination of the executive. The Company is
providing for these obligations by charges to earnings over the
applicable periods.
66
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following tables set forth the changes in net projected
benefit obligation and the fair value of plan assets for the
funded and unfunded defined benefit plans for the years ended
December 31:
U.S. Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Change in projected benefit obligation (PBO):
|
|
|
|
|
|
|
|
|
Net projected benefit obligation at the beginning of the year
|
|
$
|
348,475
|
|
|
$
|
356,107
|
|
Service cost
|
|
|
3,278
|
|
|
|
3,783
|
|
Interest cost
|
|
|
22,395
|
|
|
|
21,724
|
|
Actuarial losses (gains)
|
|
|
26,620
|
|
|
|
(10,459
|
)
|
Gross benefits paid
|
|
|
(23,861
|
)
|
|
|
(22,793
|
)
|
Plan amendments and other
|
|
|
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
Net projected benefit obligation at the end of the year
|
|
$
|
376,907
|
|
|
$
|
348,475
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at the beginning of the year
|
|
$
|
354,851
|
|
|
$
|
418,317
|
|
Actual return on plan assets
|
|
|
81,150
|
|
|
|
(111,558
|
)
|
Employer contributions
|
|
|
18,373
|
|
|
|
70,885
|
|
Gross benefits paid
|
|
|
(23,861
|
)
|
|
|
(22,793
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at the end of the year
|
|
$
|
430,513
|
|
|
$
|
354,851
|
|
|
|
|
|
|
|
|
|
|
Foreign Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
|
Net projected benefit obligation at the beginning of the year
|
|
$
|
88,166
|
|
|
$
|
129,044
|
|
Service cost
|
|
|
1,238
|
|
|
|
2,044
|
|
Interest cost
|
|
|
5,844
|
|
|
|
6,825
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
9,371
|
|
|
|
(40,004
|
)
|
Employee contributions
|
|
|
404
|
|
|
|
600
|
|
Actuarial losses (gains)
|
|
|
9,532
|
|
|
|
(17,201
|
)
|
Gross benefits paid
|
|
|
(3,473
|
)
|
|
|
(3,682
|
)
|
Effect of elimination of early measurement date
|
|
|
|
|
|
|
1,309
|
|
Other
|
|
|
(475
|
)
|
|
|
9,231
|
|
|
|
|
|
|
|
|
|
|
Net projected benefit obligation at the end of the year
|
|
$
|
110,607
|
|
|
$
|
88,166
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at the beginning of the year
|
|
$
|
84,817
|
|
|
$
|
125,213
|
|
Actual return on plan assets
|
|
|
19,000
|
|
|
|
(20,126
|
)
|
Employer contributions
|
|
|
2,754
|
|
|
|
9,021
|
|
Employee contributions
|
|
|
404
|
|
|
|
600
|
|
Foreign currency translation adjustment
|
|
|
9,001
|
|
|
|
(38,633
|
)
|
Gross benefits paid
|
|
|
(3,473
|
)
|
|
|
(3,682
|
)
|
Effect of elimination of early measurement date
|
|
|
|
|
|
|
3,193
|
|
Other
|
|
|
|
|
|
|
9,231
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at the end of the year
|
|
$
|
112,503
|
|
|
$
|
84,817
|
|
|
|
|
|
|
|
|
|
|
67
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The amounts included in the Effect of elimination of early
measurement date in the preceding tables reflect the impact of
the change in measurement date for the three United
Kingdom-based defined benefit pension plans.
The accumulated benefit obligation (ABO) consisted
of the following at December 31:
U.S. Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Funded plans
|
|
$
|
359,516
|
|
|
$
|
333,468
|
|
Unfunded plans
|
|
|
4,802
|
|
|
|
4,746
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
364,318
|
|
|
$
|
338,214
|
|
|
|
|
|
|
|
|
|
|
Foreign Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Funded plans
|
|
$
|
98,886
|
|
|
$
|
80,149
|
|
Unfunded plans
|
|
|
1,344
|
|
|
|
1,179
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
100,230
|
|
|
$
|
81,328
|
|
|
|
|
|
|
|
|
|
|
Weighted average assumptions used to determine benefit
obligations at December 31:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
U.S. Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.90
|
%
|
|
|
6.50
|
%
|
Rate of compensation increase (where applicable)
|
|
|
3.75
|
%
|
|
|
3.75
|
%
|
|
|
|
|
|
|
|
|
|
Foreign Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.98
|
%
|
|
|
6.09
|
%
|
Rate of compensation increase (where applicable)
|
|
|
2.98
|
%
|
|
|
2.98
|
%
|
For the Companys U.S. defined benefit pension plans,
the asset allocation percentages at December 31, 2009 and
2008 and the target allocation percentages for 2010, by asset
category, are as follows:
U.S. Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Plan Assets
|
|
|
|
Target Allocation
|
|
|
at December 31,
|
|
Asset Category
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Equity securities
|
|
|
40%-60%
|
|
|
|
52
|
%
|
|
|
58
|
%
|
Fixed income securities
|
|
|
30%-60%
|
|
|
|
43
|
|
|
|
31
|
|
Other*
|
|
|
0%-15%
|
|
|
|
5
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Amounts in 2009 and 2008 include cash and cash equivalents and
an approximate 1% and 10% investment in alternative assets
consisting of hedge funds, respectively. |
68
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of the fair value of plan assets for U.S. plans
at December 31, 2009 and 2008 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
Asset Category
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
|
(In thousands)
|
|
|
Cash and temporary investments
|
|
$
|
2,936
|
|
|
$
|
2,936
|
|
|
$
|
|
|
|
$
|
51,305
|
|
|
$
|
51,305
|
|
|
$
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMETEK common stock
|
|
|
25,973
|
|
|
|
25,973
|
|
|
|
|
|
|
|
20,519
|
|
|
|
20,519
|
|
|
|
|
|
Diversified common stocks
|
|
|
111,951
|
|
|
|
111,951
|
|
|
|
|
|
|
|
77,390
|
|
|
|
77,390
|
|
|
|
|
|
Diversified mutual funds
|
|
|
85,374
|
|
|
|
|
|
|
|
85,374
|
|
|
|
79,622
|
|
|
|
44,177
|
|
|
|
35,445
|
|
Real estate investment trust
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
652
|
|
|
|
652
|
|
|
|
|
|
Fixed income securities and other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and investment grade
|
|
|
78,849
|
|
|
|
62,531
|
|
|
|
16,318
|
|
|
|
27,166
|
|
|
|
27,166
|
|
|
|
|
|
Global asset allocation and other
|
|
|
56,319
|
|
|
|
|
|
|
|
56,319
|
|
|
|
23,570
|
|
|
|
23,570
|
|
|
|
|
|
Diversified mutual funds
|
|
|
50,153
|
|
|
|
50,153
|
|
|
|
|
|
|
|
57,217
|
|
|
|
57,217
|
|
|
|
|
|
Hedge funds
|
|
|
18,958
|
|
|
|
|
|
|
|
|
|
|
|
17,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
430,513
|
|
|
$
|
253,544
|
|
|
$
|
158,011
|
|
|
$
|
354,851
|
|
|
$
|
301,996
|
|
|
$
|
35,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 investments are unadjusted, observable inputs from
active markets. Level 2 investments are equity funds and
fixed income funds that are valued by the vendor using
observable market inputs. Hedge funds are considered
level 3 investments as their values are determined by the
sponsor using unobservable market data.
The table below sets forth a summary of changes of the
U.S. plans assets fair value using significant
unobservable inputs (level 3) for the year ended
December 31, 2009.
|
|
|
|
|
|
|
Hedge Funds
|
|
|
|
(In thousands)
|
|
|
Balance, January 1, 2009
|
|
$
|
17,410
|
|
Actual return on assets:
|
|
|
|
|
Unrealized gains relating to instruments still held at the end
of the year
|
|
|
1,548
|
|
Realized gains (losses) relating to assets sold during the year
|
|
|
|
|
Purchases, sales, issuances and settlements, net
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
$
|
18,958
|
|
|
|
|
|
|
The expected long-term rate of return on these plan assets was
8.25% in 2009 and 2008. Equity securities included
679,200 shares of AMETEK, Inc. common stock with a market
value of $26.0 million (6.0% of total plan investment
assets) at December 31, 2009 and 679,200 shares of
AMETEK, Inc. common stock with a market value of
$20.5 million (5.8% of total plan investment assets) at
December 31, 2008.
The objectives of the AMETEK, Inc. U.S. defined benefit
plans investment strategy are to maximize the plans
funded status and minimize Company contributions and plan
expense. Because the goal is to optimize returns over the long
term, an investment policy that favors equity holdings has been
established. Since there may be periods of time where both
equity and fixed-income markets provide poor returns, an
allocation to alternative assets may be made to improve the
overall portfolios diversification and return potential.
The Company periodically reviews its asset allocation, taking
into consideration plan liabilities, plan benefit payment
streams and the
69
AMETEK,
Inc.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
investment strategy of the pension plans. The actual asset
allocation is monitored frequently relative to the established
targets and ranges and is rebalanced when necessary.
The equity portfolio is diversified by market capitalization and
style. The equity portfolio also includes an international
component.
The objective of the fixed-income portion of the pension assets
is to provide interest rate sensitivity for a portion of the
assets and to provide diversification. The fixed-income
portfolio is diversified within certain quality and maturity
guidelines in an attempt to minimize the adverse effects of
interest rate fluctuations.
Other than for investments in alternative assets, described in
the footnote to the table above, certain investments are
prohibited. Prohibited investments include venture capital,
private placements, unregistered or restricted stock, margin
trading, commodities, short selling and rights and warrants.
Foreign currency futures, options and forward contracts may be
used to manage foreign currency exposure.
For the Companys foreign defined benefit pension plans,
the asset allocation percentages at December 31, 2009 and
2008 and the target allocation percentages for 2010, by asset
category, are as follows: