AMETEK's Continuing Operations Increase Third Quarter Earnings
20 October 1998
AMETEK's Continuing Operations Increase Third Quarter Earnings 11 Percent To 42 Cents Per Share
Third Quarter Sales Up 10 Percent; Operating Income Rises 17 Percent
PAOLI, Pa., Oct. 20 -- AMETEK, Inc. today
announced that third quarter 1998 after-tax income from continuing operations
totaled $14.1 million, up 9% from $12.9 million in the 1997 third quarter.
Diluted earnings per share from continuing operations rose 11% to 42 cents per
share from 38 cents per share in the 1997 third quarter. Third quarter 1998
sales rose 10% to $232.6 million from $212.1 million in the year-ago quarter.
Operating income was $27.0 million, up 17% from $23.1 million in the third
quarter of 1997.
Nine Months Results Up 20 Percent
For the nine-month period ended September 30, 1998, AMETEK's after-tax
income from continuing operations was $44.3 million, or $1.31 per diluted
share, versus income of $36.7 million, or $1.09 per share, for the same period
of 1997, a 20% increase in earnings per share. Sales for the nine-month
period ended September 30, 1998 were $720.6 million, up 14% from
$630.7 million in the prior-year nine-month period. Operating income was
$84.3 million, up 25% from $67.6 million in the same period of 1997.
AMETEK's Third Quarter Results Achieve Growth Objective
Walter E. Blankley, chairman and chief executive officer, said, "We
achieved our double-digit percentage growth objective for earnings per share
in the 1998 third quarter. The Electromechanical Group posted double-digit
percentage growth in both sales and income. The Electronic Instruments Group
performed well with strong aerospace and heavy-truck markets and operating
margin improvements resulting from our Operational Excellence strategy."
Economic Situation Raises Concern About Fourth Quarter 1998
"We are concerned with the continuing economic turmoil in Asia and
elsewhere, particularly in Russia where sales by our European motor customers
are down. We now expect that our fourth quarter 1998 diluted earnings per
share will be moderately below the fourth quarter of 1997, when we earned
40 cents per diluted share," added Mr. Blankley.
AMETEK Is Positioned to Address Global Uncertainty
"AMETEK has never been in a stronger position, financially or
operationally, to successfully address the challenges of the global business
environment. Our recent debt offering increases our financial flexibility and
strength and reduces the interest rate on our long-term debt. Operationally,
our Four Growth Strategies have, and will continue to produce solid results.
We have assimilated a number of important acquisitions. We are concluding the
startup phase at three low-cost motor plants, while consolidating the
operations of our Italian motor facilities to reduce costs.
"We are focusing with even greater intensity on Operational Excellence
with its emphasis on addressing costs, flow manufacturing, and working capital
management. As a result, we expect our free cash flow to increase, enabling
us to continue to select from a menu of options to enhance shareholder value:
growth, strategic acquisitions, Operational Excellence, debt reduction, and
share repurchases," noted Mr. Blankley.
"AMETEK's Four Growth Strategies will produce double-digit sales and
earnings per share growth for 1998 and a fifth consecutive year of record
sales and earnings per share from continuing operations. The Company has a
strong, experienced team that has managed exceptionally well in similar
business environments, and we expect to continue our growth in 1999 and
beyond."
Electromechanical Group (EMG) Achieves Strong Sales and Income Gains
Frank S. Hermance, president and chief operating officer, said, "EMG
recorded double-digit percentage growth in third quarter sales and income,
despite softness in our worldwide floor-care business. We also saw some
increased competition in our European markets due to Asian currency effects.
"The Group's growth primarily came from the brushless motor business led
by Rotron, Inc., a world leader in direct-current motors and motor-blowers,
which AMETEK acquired in January 1998. Continued sales and profit
improvements at our Shanghai, China, motor plant also contributed to the
Groups' third quarter gains." noted Mr. Hermance.
Electronic Instruments Group (EIG) Reports Higher Sales and Income
Mr. Hermance continued, "EIG posted substantial gains in third quarter
operating income and profit margins on higher sales. We increased sales and
income in our aerospace products and market-leading heavy-truck instruments
businesses, versus the prior-year third quarter, reflecting the continued
strength of the commercial aircraft and heavy-truck markets."
"The Group also achieved operating and margin improvements through our
Operational Excellence initiatives and benefited from the contribution of our
April 1998 acquisition of Western Research -- a leader in gas analyzers and
emissions-monitoring equipment," noted Mr. Hermance.
AMETEK Repurchasing Shares; Board Approves New Repurchase Plan
Consistent with its priority of enhancing shareholder value, AMETEK's
Board of Directors authorized in September a new program to repurchase up to
$50 million of AMETEK common shares. That authorization cancels an earlier
$50 million program of which approximately $23 million had been used for share
repurchases.
Since the beginning of 1998, the Company has repurchased approximately
1.3 million shares, of which 988,000 shares were purchased in the third and
early fourth quarters. Since 1993, AMETEK has acquired 13.8 million shares,
or about 32% of its then outstanding common stock.
AMETEK Strengthens Capital Structure with $225 Million Investment Grade
Debt; Exchange Completed
John J. Molinelli, executive vice president and chief financial officer,
said, "On September 30, AMETEK successfully completed a public exchange offer
for all of its 10-year, 7.2% Senior Notes due 2008, originally issued and sold
in July 1998 as a private placement, for a like amount of 7.2% Senior Notes
due 2008. The Notes issued and registered in the exchange have essentially
the same terms and conditions as did the unregistered Notes, except that they
are not subject to the restrictions on resale and transfers, which applied to
the unregistered Notes."
"We are pleased to complete the final step of a debt offering, which
strengthens our capital structure and provides a solid foundation for the
Company. Despite a tough market, our Senior Notes offering in July was
oversubscribed, and the Notes were rated investment grade by Standard & Poors,
reflecting AMETEK's financial and operating strength," he added.
Mr. Molinelli concluded, "The $225 million of 7.2% Senior Notes were used
to repay approximately $136 million of 9-3/4% Senior Notes due 2004, reduce
bank debt, and pay fees and expenses related to the offering. The refinancing
lowers AMETEK's cost of capital and strengthens our capacity for future
growth."
Value-enhancing Actions Affect Net Income Comparisons for 1998 and 1997
Net income comparisons for both the third quarter and nine-month periods
of 1998 and 1997 were reduced by the non-recurring items described below.
Third quarter 1998 net income was $5.3 million, or 16 cents per diluted
share, which is after an extraordinary after-tax charge of $8.7 million, or
26 cents per share, for the early repayment of 9-3/4% Senior Notes in July
1998. Third quarter 1997 net income was $8.4 million, or 24 cents per diluted
share, which included a net charge of $4.5 million, or 14 cents per share, for
the net costs associated with the August 1997 spin off and merger of AMETEK's
water filtration business into Culligan Water Technologies, Inc. The spin off
and merger resulted in AMETEK shareholders receiving Culligan stock tax free
and valued at $4.50 per share.
The 1998 nine-month net income was $35.6 million, or $1.05 per diluted
share, which is after the third quarter extraordinary, after-tax charge
referred to previously. The 1997 nine-month net income was $36.8 million, or
$1.09 per share, which reflects income of $5.1 million, or 15 cents per share,
from the discontinued water filtration business, offset by a charge of
$4.9 million, or 15 cents per share, for the one-time costs associated with
the spin off and merger referred to above.
Corporate Profile
AMETEK is a leading global manufacturer of electric motors and electronic
instruments in North America, Europe, and Asia. Sales are expected to
approach $1 billion in 1998. It's Corporate Growth Plan is based on Four Key
Strategies: Operational Excellence, New Products, Global & Market Expansion,
and Strategic Acquisitions & Joint Ventures. Its objective is double-digit
percentage growth in earnings per share from continuing operations and a
superior return on total capital. The common stock of AMETEK is a component
of the S & P Mid Cap 400 Index and the Russell 2000 Growth Index.
Forward-looking Information
Statements in this news release that are not historical are considered
"forward-looking statements" and are subject to change based on various
factors and uncertainties that may cause actual results to differ
significantly from expectations. Those factors are contained in AMETEK's
Securities and Exchange Commission filings.
AMETEK, Inc.
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(Dollars and shares in thousands except per share amounts)
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
Net sales $232,593 $212,149 $720,648 $630,651
Expenses:
Cost of sales, excluding
depreciation 178,380 166,091 552,346 493,094
Selling, general and
administrative 19,827 16,141 61,324 49,794
Depreciation 7,410 6,807 22,650 20,176
Total expenses 205,617 189,039 636,320 563,064
Operating income 26,976 23,110 84,328 67,587
Other income (expenses):
Interest expense (6,152) (4,729) (18,520) (13,868)
Other, net 982 1,573 3,759 3,442
Income from continuing
operations before income
taxes 21,806 19,954 69,567 57,161
Provision for income taxes 7,756 7,080 25,244 20,505
Income from continuing
operations 14,050 12,874 44,323 36,656
Discontinued operations,
net of taxes:
Income from discontinued
operation -- 449 -- 5,092
Costs associated with
disposition of discontinued
operation -- (4,943) -- (4,943)
Income before extraordinary
item 14,050 8,380 44,323 36,805
Extraordinary loss on early
extinguishment of debt,
net of taxes (8,710) -- (8,710) --
Net income $5,340 $8,380 $35,613 $36,805
Basic earnings per share:
Income from continuing
operations $0.43 $0.39 $1.34 $1.12
Discontinued operations:
Income from discontinued
operation -- 0.01 -- 0.15
Costs associated with
disposition of discontinued
operation -- (0.15) -- (0.15)
Income before extraordinary
item 0.43 0.25 1.34 1.12
Extraordinary loss on early
extinguishment of debt (0.27) -- (0.26) --
Net income $0.16 $0.25 $1.08 $1.12
Diluted earnings per share:
Income from continuing
operations $0.42 $0.38 $1.31 $1.09
Discontinued operations:
Income from discontinued
operation -- 0.01 -- 0.15
Costs associated with
disposition of discontinued
operation -- (0.15) -- (0.15)
Income before extraordinary
item 0.42 0.24 1.31 1.09
Extraordinary loss on early
extinguishment of debt (0.26) -- (0.26) --
Net income $0.16 $0.24 $1.05 $1.09
Average common shares
outstanding
Basic shares 32,797 33,062 32,932 32,874
Diluted shares 33,740 34,284 34,047 33,772
Dividends per share $0.06 $0.06 $0.18 $0.18
AMETEK, INC.
INFORMATION BY BUSINESS SEGMENT (Unaudited)
(Dollars in thousands)
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
Net sales
Electromechanical $127,656 $111,062 $405,361 $341,252
Electronic Instruments 104,937 101,087 315,287 289,399
Total Consolidated $232,593 $212,149 $720,648 $630,651
Operating income
Electromechanical $17,234 $15,554 $56,163 $45,366
Electronic Instruments 14,978 12,316 44,544 37,585
Total segments 32,212 27,870 100,707 82,951
Corporate and other (5,236) (4,760) (16,379) (15,364)
Total Consolidated $26,976 $23,110 $84,328 $67,587