NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
|
Significant Accounting Policies
|
Basis of Consolidation
The accompanying consolidated
financial statements reflect the results of 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.
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 and assumptions.
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, 2016 and 2015, the Companys investment in a fixed-income mutual fund (held by its captive insurance subsidiary) is classified as
available-for-sale. The aggregate fair value of the fixed-income mutual fund at December 31, 2016 and 2015 was $7.3 million ($8.0 million cost basis) and $8.5 million ($9.9 million cost basis), respectively. The
temporary unrealized gain or loss on the fixed-income mutual fund is recorded as a separate component of accumulated other comprehensive income (in stockholders equity), and is not significant. Certain of the Companys other investments,
which are not significant, are also accounted for by the equity method of accounting.
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 allowance for doubtful accounts is recorded against the amount due from these customers. For all other customers, the Company recognizes allowance for doubtful accounts based on the length of time
specific receivables are past due based on its historical experience. The allowance for doubtful accounts was $10.3 million and $8.6 million at December 31, 2016 and 2015, respectively. See Note 7.
Inventories
The Company uses the first-in, first-out (FIFO) method of accounting, which approximates current replacement cost, for approximately 82% of its inventories at December 31, 2016. The
last-in, first-out (LIFO) method of accounting is used to determine cost for the remaining 18% of the Companys inventory at December 31, 2016. For inventories where cost is determined by the LIFO method, the FIFO would have
been $18.4 million and $19.4 million higher than the LIFO value reported in the consolidated balance sheet at December 31, 2016 and 2015, 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. See Note 7.
Business Combinations
The Company allocates the purchase
price of an acquired company, including when applicable, the fair value of contingent consideration between tangible and intangible assets acquired and liabilities assumed from
55
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the acquired business based on their estimated fair values, with the residual of the purchase price recorded as goodwill. The results of operations of the acquired business are included in the
Companys operating results from the date of acquisition. See Note 5.
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 expense as incurred. Depreciation of plant and equipment is calculated principally on a
straight-line
basis over 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. Depreciation expense was $74.8 million, $68.7 million and $63.7 million for the years ended December 31, 2016, 2015 and 2014, respectively. See Note 7.
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 its operating segments.
Generally, goodwill arises from acquisitions of specific operating companies and is assigned to the reporting unit in which a particular operating company resides. The Companys reporting units are composed of divisions that are one level below
its operating segments and for 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 value of its reporting units in a sale 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 on the Companys long-range plan and are considered level 3 inputs. 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 using level 3 inputs. 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 Company completed
its required annual impairment tests in the fourth quarter of 2016, 2015 and 2014 and determined that the carrying values of the Companys goodwill were not impaired. The Company completed its required annual impairment tests in the fourth
quarter of 2016 and determined that the carrying values of
56
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
certain of the Companys trademarks and trade names with indefinite lives were impaired. During 2016, the Company recorded a $13.9 million non-cash impairment charge related to certain
of the Companys trade names. The Company completed its required annual impairment tests in the fourth quarter of 2015 and 2014 and determined that the carrying values of the Companys other intangible assets with indefinite lives were not
impaired.
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 is considered impaired when the total projected undiscounted cash flows from those assets 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 value of those assets. Fair value is determined primarily using present value techniques based on projected
cash flows from the asset group.
Intangible assets, other than goodwill, with definite lives are amortized
over their estimated useful lives. Patents and technology are being amortized over useful lives of five to 20 years, with a weighted average life of 16 years. Customer relationships are being amortized over a period of five to 20 years,
with a weighted average life of 19 years. Miscellaneous other intangible assets are being amortized over a period of two to 20 years. The Company periodically evaluates the reasonableness of the estimated useful lives of these intangible
assets. See Note 6.
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 denominated 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, export sales, debt or foreign currency transactions, thereby minimizing the Companys exposure to
raw material commodity price or foreign currency fluctuation.
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 within stockholders equity to the extent they are effective as hedges. 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.
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 Companys
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
57
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 consolidated statement of income. Accruals for sales returns, other allowances and estimated warranty costs are provided at the time revenue is recognized based on the Companys historical experience. At
December 31, 2016 and 2015, the accrual for future warranty obligations was $22.0 million and $22.8 million, respectively. The Companys expense for warranty obligations was $16.0 million in 2016, $14.8 million in 2015
and $16.5 million in 2014. The warranty periods for products sold vary among the Companys operations, but generally do not exceed one year. The Company calculates its warranty expense provision based on its historical warranty experience
and adjustments are made periodically to reflect actual warranty expenses. See Note 12.
Research and Development
Research and development costs are included in Cost of sales as incurred and were $112.0 million in 2016,
$116.3 million in 2015 and $119.3 million in 2014.
Shipping and Handling Costs
Shipping and handling costs are included in Cost of sales and were $47.9 million in 2016, $50.5 million in 2015
and $49.0 million in 2014.
Share-Based Compensation
The Company expenses the fair value of share-based awards made under its share-based plans in the consolidated financial
statements over their requisite service period of the grants. See Note 10.
Income Taxes
The Companys 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. The Company recognizes interest and penalties accrued related to uncertain tax positions in income tax
expense.
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 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. See Note 8.
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. All unrecognized prior service costs, remaining transition
58
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
obligations or assets and actuarial gains and losses have been recognized, net of tax effects, as a charge to accumulated other comprehensive income in stockholders equity and will be
amortized as a component of net periodic pension cost. The Company uses a measurement date of December 31 (its fiscal year end) for its U.S. and foreign defined benefit plans. See Note 11.
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 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 was as
follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(In thousands)
|
|
Weighted average shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares
|
|
|
232,593
|
|
|
|
239,906
|
|
|
|
244,885
|
|
Equity-based compensation plans
|
|
|
1,137
|
|
|
|
1,680
|
|
|
|
2,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares
|
|
|
233,730
|
|
|
|
241,586
|
|
|
|
247,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
Recent Accounting Pronouncements
|
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
No. 2014-09,
Revenue from
Contracts with Customers
(ASU 2014-09)
and modified the standard thereafter. The objective of
ASU 2014-09
is to establish a single
comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance. The core principle of
ASU 2014-09
is that an entity recognizes revenue at the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services.
ASU 2014-09
applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification.
ASU 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2017 and may be early
adopted for interim and annual reporting periods beginning after December 15, 2016. The Company will adopt
ASU 2014-09
as of January 1, 2018. The guidance permits adoption by retrospectively
applying the guidance to each prior reporting period presented (full retrospective method) or prospectively applying the guidance and providing additional disclosures comparing results to previous guidance, with the cumulative effect of initially
applying the guidance recognized in beginning retained earnings at the date of initial application (modified retrospective method). The Company is in the process of determining its method of adoption.
The Company has completed its initial assessment phase and is proceeding with its implementation plan. The initial
assessment consisted of reviewing a representative sample of contracts, discussions with key stakeholders and cataloging potential impacts on the Companys operations, accounting policies, financial control and financial statements. The
Companys initial assessment indicates the key changes in the standard that impact the Companys revenue recognition relate to the allocation of contract revenues between various products and services, the timing of when those revenues are
recognized and the deferral of incremental costs to obtain a contract. Given the diversity of its commercial arrangements, the Company is continuing to determine the impact
ASU 2014-09
may have on its
consolidated results of operations, financial position, cash flows and financial statement disclosures.
59
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In February 2015, the FASB issued
ASU No. 2015-02,
Amendments to the Consolidation Analysis
(ASU 2015-02).
ASU 2015-02
is
intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and
mortgage-backed security transactions).
ASU 2015-02
makes specific amendments to the current consolidation guidance and ends the deferral granted to investment companies from applying the variable
interest entities guidance. The Company adopted
ASU 2015-02
effective January 1, 2016 and the adoption did not have a significant impact on the Companys consolidated results of operations,
financial position or cash flows.
In April 2015, the FASB issued
ASU No. 2015-03,
Simplifying the Presentation of Debt Issuance Costs
(ASU 2015-03).
ASU 2015-03
requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. The Company retrospectively adopted
ASU 2015-03
effective January 1, 2016 and the adoption did not have a significant impact on the Companys consolidated results of operations, financial position or cash flows.
In April 2015, the FASB issued
ASU No. 2015-05
, Customers
Accounting for Fees Paid in a Cloud Computing Arrangement
(ASU 2015-05).
ASU 2015-05
is intended to help entities evaluate the accounting for
fees paid by a customer in a cloud computing arrangement. The guidance clarifies that customers should determine whether a cloud computing arrangement includes the license of software by applying the same guidance cloud service providers use to make
this determination. The Company prospectively adopted
ASU 2015-05
effective January 1, 2016 and the adoption did not have a significant impact on the Companys consolidated results of
operations, financial position or cash flows.
In July 2015, the FASB issued
ASU No. 2015-11,
Simplifying the Measurement of Inventory
(ASU 2015-11),
which applies to inventory that is measured using first-in,
first-out (FIFO) or average cost. As prescribed in this update, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of
business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, first-out (LIFO).
ASU 2015-11
is effective for interim and annual periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual
reporting period. The Company does not expect the adoption of
ASU 2015-11
to have a significant impact on the Companys consolidated results of operations, financial position or cash flows.
In November 2015, the FASB issued
ASU No. 2015-17,
Balance Sheet Classification of Deferred Taxes
(ASU 2015-17).
ASU 2015-17
simplifies the presentation of deferred taxes by requiring
deferred tax assets and liabilities be classified as noncurrent on the consolidated balance sheet.
ASU 2015-17
is effective for interim and annual reporting periods beginning after December 15, 2016.
ASU 2015-17
may be adopted prospectively or retrospectively and early adoption is permitted. The Company does not expect the adoption of
ASU 2015-17
to have a
significant impact on the Companys consolidated results of operations, financial position or cash flows. The Company expects to prospectively adopt
ASU 2015-17.
In February 2016, the FASB issued
ASU No. 2016-02,
Leases
(ASU 2016-02).
The new standard establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer
than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.
ASU 2016-02
is effective for interim
and annual reporting periods beginning after December 15, 2018.
ASU 2016-02
is to be adopted using a modified retrospective approach and early adoption is permitted. The Company has not determined
the impact
ASU 2016-02
may have on the Companys consolidated results of operations, financial position, cash flows and financial statement disclosures.
60
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In March 2016, the FASB issued
ASU No. 2016-09,
Improvements to Employee Share-Based Payment Accounting
(ASU 2016-09).
ASU 2016-09
includes changes to the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on
the statement of cash flows.
ASU 2016-09
is effective for interim and annual reporting periods beginning after December 15, 2016 and early adoption is permitted. The Company is unable to estimate the
impact of adoption as it is dependent upon future stock option exercises, which cannot be predicted. However, the Company does not expect the adoption of
ASU 2016-09
to have a significant impact on the
Companys consolidated results of operations, financial position, cash flows and financial statement disclosures.
In January 2017, the FASB issued ASU
No. 2017-01,
Clarifying the Definition of a Business
(ASU 2017-01).
ASU 2017-01
provides a more robust framework to use in determining when a set of assets and activities is a business.
ASU 2017-01
requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so,
the set of assets is not a business.
ASU 2017-01
requires that, to be a business, the set must include, at a minimum, an input and a substantive process that together significantly contribute to the
ability to create outputs.
ASU 2017-01
is effective for interim and annual reporting periods beginning after December 15, 2017.
ASU 2017-01
will be
applied prospectively to any transactions occurring within the period of adoption. Early adoption is permitted, including for interim or annual periods in which the financial statements have not been issued or made available for issuance. The
Company has not determined the impact
ASU 2017-01
may have on the Companys consolidated results of operations, financial position, cash flows and financial statement disclosures.
In January 2017, the FASB issued
ASU No. 2017-04,
Simplifying the
Test for Goodwill Impairment
(ASU 2017-04).
ASU 2017-04
eliminates the requirement to calculate the implied fair value of goodwill (second
step) to measure a goodwill impairment charge. Under the guidance, an impairment charge will be measured based on the excess of the reporting units carrying amount over its fair value (first step).
ASU 2017-04
is effective for interim and annual reporting periods beginning after December 15, 2019 and early adoption is permitted. The Company has not determined the impact
ASU 2017-04
may have on the Companys consolidated results of operations, financial position, cash flows and financial statement disclosures.
3.
|
Fair Value Measurements
|
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 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.
61
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table provides the Companys assets that are measured
at fair value on a recurring basis as of December 31, 2016 and 2015, consistent with the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
Fair Value
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
Fixed-income investments
|
|
$
|
7,317
|
|
|
$
|
8,482
|
|
The fair value of fixed-income investments, which are valued as level 1 investments,
was based on quoted market prices. The fixed-income investments are shown as a component of long-term assets on the consolidated balance sheet.
For the year ended December 31, 2016, gains and losses on the investments noted above were not significant. No transfers between level 1 and level 2 investments occurred during the year
ended December 31, 2016.
Financial Instruments
Cash, cash equivalents and fixed-income investments are recorded at fair value at December 31, 2016 and 2015 in the
accompanying consolidated balance sheet.
The following table provides the estimated fair values of the
Companys financial instrument liabilities, for which fair value is measured for disclosure purposes only, compared to the recorded amounts at December 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
Recorded
Amount
|
|
|
Fair Value
|
|
|
Recorded
Amount
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
Short-term borrowings, net
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(312,999
|
)
|
|
$
|
(312,999
|
)
|
Long-term debt, net (including current portion)
|
|
|
(2,341,565
|
)
|
|
|
(2,386,901
|
)
|
|
|
(1,625,041
|
)
|
|
|
(1,683,523
|
)
|
The fair value of
short-term
borrowings, net
approximates the carrying value. Short-term borrowings, net are valued as level 2 liabilities as they are corroborated by observable market data. The Companys long-term debt, net is all privately held with no public market for this debt,
therefore, the fair value of long-term debt, net was computed based on comparable current market data for similar debt instruments and is considered to be a level 3 liability. See Note 9 for long-term debt principal amounts, interest rates and
maturities.
Foreign Currency
At December 31, 2016 and 2015, the Company had no forward contracts outstanding. For the year ended December 31, 2016, realized gains and losses on foreign currency forward contracts were not
significant.
The Company has designated certain foreign-currency-denominated long-term borrowings as hedges of the net investment in certain foreign operations. As of December 31, 2016, these net investment
hedges included British-pound- and Euro-denominated long-term debt. As of December 31, 2015, these net investment hedges included British-pound-denominated long-term debt. These borrowings were designed to create net investment
62
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
hedges in each of the designated foreign subsidiaries. The Company designated the British-pound- and Euro-denominated loans referred to above as hedging instruments to offset translation gains or
losses on the net investment due to changes in the British pound and Euro exchange rates. These net investment hedges are evidenced by managements contemporaneous documentation supporting the hedge designation. Any gain or loss on the hedging
instruments (the debt) following hedge designation 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, 2016 and 2015, the Company had $376.3 million and
$177.1 million, respectively, of British-pound-denominated loans, which were designated as a hedge against the net investment in British pound functional currency foreign subsidiaries. At December 31, 2016, the Company had
$527.7 million in Euro-denominated loans, which were designated as a hedge against the net investment in Euro functional currency foreign subsidiaries. As a result of the British-pound- and Euro-denominated loans being designated and 100%
effective as net investment hedges, $50.0 million and $14.4 million of currency remeasurement gains have been included in the foreign currency translation component of other comprehensive income for the years ended December 31, 2016
and 2015, respectively.
The Company spent $391.4 million in cash, net of cash acquired, to acquire Brookfield Engineering Laboratories (Brookfield) and ESP/SurgeX in January 2016, HS Foils and
Nu Instruments in July 2016 and Laserage Technology Corporation (Laserage) in October 2016. Brookfield is a manufacturer of viscometers and rheometers, as well as instrumentation to analyze texture and powder flow.
ESP/SurgeX is a manufacturer of energy intelligence and power protection, monitoring and diagnostic solutions. HS Foils develops and manufactures key components used in radiation detectors including ultra-thin radiation windows, silicon drift
detectors and
x-ray
filters. Nu Instruments is a provider of magnetic sector mass spectrometers used for elemental and isotope analysis. Laserage is a provider of laser fabrication services for the
medical device market. Brookfield, ESP/SurgeX, HS Foils and Nu Instruments are part of AMETEKs Electronic Instruments Group (EIG) and Laserage is part of AMETEKs Electromechanical Group (EMG).
The following table represents the preliminary allocation of the aggregate purchase price for the net assets
of the above acquisitions based on their estimated fair values at acquisition (in millions):
|
|
|
|
|
Property, plant and equipment
|
|
$
|
23.1
|
|
Goodwill
|
|
|
171.3
|
|
Other intangible assets
|
|
|
192.2
|
|
Deferred income taxes, net
|
|
|
(18.8
|
)
|
Long-term liabilities
|
|
|
(2.4
|
)
|
Net working capital and other
(1
)
|
|
|
26.0
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
391.4
|
|
|
|
|
|
|
(1)
|
Includes $16.1 million in accounts receivable, whose fair value, contractual cash flows and expected cash flows are approximately equal.
|
The amount allocated to goodwill is reflective of the benefits the Company expects to
realize from the acquisitions as follows: Brookfields viscosity measurement instrumentation products and technologies complement the Companys existing laboratory instrumentation businesses and provides the Company with opportunities to
expand that business platform into a broader range of markets and applications. ESP/SurgeXs
63
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
patented technology is widely used by the business equipment, imaging, audio visual, information technology, gaming and vending industries and is a strategic fit with the Companys existing
power protection platform to accelerate product innovation and market expansion worldwide. HS Foils broadens the Companys product offering and technical capabilities with its approach of bringing advanced materials and fabrication methods
from micro- and nanofabrication to new application areas. Nu Instruments broadens the Companys product offering and technical capabilities in differentiated, high-end analytical instrumentation. Laserage offers precision tube fabrication
of minimally invasive surgical devices, stents and catheter-based delivery systems. The Company expects approximately $99 million of the goodwill recorded in connection with the 2016 acquisitions will be tax deductible in future years.
At December 31, 2016, the purchase price allocated to other intangible assets of $192.2 million
consists of $34.5 million of indefinite-lived intangible trade names, which are not subject to amortization. The remaining $157.7 million of other intangible assets consists of $124.8 million of customer relationships, which are being
amortized over a period of 18 to 20 years and $32.9 million of purchased technology, which is being amortized over a period of 10 to 18 years. Amortization expense for each of the next five years for the 2016 acquisitions listed
above is expected to approximate $9 million per year.
The Company is in the process of finalizing the
measurement of certain liabilities for its October 2016 acquisition of Laserage and July 2016 acquisition of Nu Instruments, including the accounting for income taxes.
The 2016 acquisitions noted above had an immaterial impact on reported net sales, net income and diluted earnings per
share for the year ended December 31, 2016. Had the 2016 acquisitions been made at the beginning of 2016 or 2015, unaudited pro forma net sales, net income and diluted earnings per share for the years ended December 31, 2016 and 2015,
respectively, would not have been materially different than the amounts reported. Pro forma results are not necessarily indicative of the results that would have occurred if the acquisitions had been completed at the beginning of 2016 or 2015.
In 2015, the Company spent $356.5 million in cash, net of cash acquired, to acquire Global Tubes in
May 2015 and Surface Vision in July 2015. Global Tubes is a manufacturer of high-precision, small-diameter metal tubing. Surface Vision develops and manufactures software-enabled vision systems used to inspect surfaces of continuously
processed materials for flaws and defects. Global Tubes is part of EMG and Surface Vision is part of EIG.
In
2014, the Company spent $573.6 million in cash, net of cash acquired, to acquire Teseq Group in January 2014, VTI Instruments (VTI) in February 2014, Luphos GmbH in May 2014, Zygo Corporation in
June 2014 and Amptek, Inc. in August 2014. Teseq is a manufacturer of test and measurement instrumentation for electromagnetic compatibility testing. VTI is a manufacturer of high-precision test and measurement instrumentation.
Luphos core technology is used in the measurement of complex aspheric optical surfaces and other surfaces through non-contact methods. Zygo is a provider of optical metrology solutions, high-precision optics and optical assemblies for use in a
wide range of scientific, industrial and medical applications. Amptek is a manufacturer of instruments and detectors used to identify composition of materials using x-ray fluorescence technology. Teseq, VTI, Luphos, Zygo and Amptek are part of EIG.
Acquisition Subsequent to December 31, 2016
In February 2017, the Company acquired
Rauland-Borg
for approximately
$340 million in cash, with a potential $30 million contingent payment due upon the achievement of certain milestones.
Rauland-Borg
has estimated annual sales of approximately $160 million.
Rauland-Borg
is a global provider of enterprise clinical and education communications solutions for hospitals, health systems and educational facilities.
Rauland-Borg
will
join EIG.
64
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6.
|
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, 2014
|
|
$
|
1,646.7
|
|
|
$
|
967.3
|
|
|
$
|
2,614.0
|
|
Goodwill acquired
|
|
|
64.0
|
|
|
|
89.5
|
|
|
|
153.5
|
|
Purchase price allocation adjustments and other
|
|
|
(2.3
|
)
|
|
|
|
|
|
|
(2.3
|
)
|
Foreign currency translation adjustments
|
|
|
(30.2
|
)
|
|
|
(28.4
|
)
|
|
|
(58.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
1,678.2
|
|
|
|
1,028.4
|
|
|
|
2,706.6
|
|
Goodwill acquired
|
|
|
165.0
|
|
|
|
6.3
|
|
|
|
171.3
|
|
Purchase price allocation adjustments and other
|
|
|
0.3
|
|
|
|
(0.1
|
)
|
|
|
0.2
|
|
Foreign currency translation adjustments
|
|
|
(26.5
|
)
|
|
|
(32.6
|
)
|
|
|
(59.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
1,817.0
|
|
|
$
|
1,002.0
|
|
|
$
|
2,819.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets were as follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Definite-lived intangible assets (subject to amortization):
|
|
|
|
|
|
|
|
|
Patents
|
|
$
|
49,755
|
|
|
$
|
51,059
|
|
Purchased technology
|
|
|
283,612
|
|
|
|
266,644
|
|
Customer lists
|
|
|
1,363,700
|
|
|
|
1,257,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,697,067
|
|
|
|
1,575,433
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization:
|
|
|
|
|
|
|
|
|
Patents
|
|
|
(34,927
|
)
|
|
|
(34,745
|
)
|
Purchased technology
|
|
|
(87,869
|
)
|
|
|
(73,809
|
)
|
Customer lists
|
|
|
(362,924
|
)
|
|
|
(306,558
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(485,720
|
)
|
|
|
(415,112
|
)
|
|
|
|
|
|
|
|
|
|
Net intangible assets subject to amortization
|
|
|
1,211,347
|
|
|
|
1,160,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets (not subject to amortization):
|
|
|
|
|
|
|
|
|
Trademarks and trade names
|
|
|
536,574
|
|
|
|
512,640
|
|
Impairment
|
|
|
(13,900
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
522,674
|
|
|
|
512,640
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,734,021
|
|
|
$
|
1,672,961
|
|
|
|
|
|
|
|
|
|
|
The Company completed its required annual impairment tests in the fourth quarter of 2016
and determined that the carrying values of certain of the Companys trademarks and trade names with indefinite lives were
65
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
impaired. During 2016, the Company recorded, in Cost of sales, a $13.9 million non-cash impairment charge related to certain of the Companys trade names, of which $9.2 million
impacted EIG and $4.7 million impacted EMG. See Note 1 for further descriptions of the Companys impairment testing.
Amortization expense was $104.9 million (including impairment of $13.9 million), $80.8 million and $74.9 million for the years ended December 31, 2016, 2015 and 2014,
respectively. Amortization expense for each of the next five years is expected to approximate $91 million per year, not considering the impact of potential future acquisitions.
7.
|
Other Consolidated Balance Sheet Information
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
INVENTORIES, NET
|
|
|
|
|
|
|
|
|
Finished goods and parts
|
|
$
|
75,827
|
|
|
$
|
83,229
|
|
Work in process
|
|
|
101,484
|
|
|
|
105,259
|
|
Raw materials and purchased parts
|
|
|
314,793
|
|
|
|
325,963
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
492,104
|
|
|
$
|
514,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT, NET
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
41,875
|
|
|
$
|
41,951
|
|
Buildings
|
|
|
281,847
|
|
|
|
293,002
|
|
Machinery and equipment
|
|
|
840,725
|
|
|
|
849,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,164,447
|
|
|
|
1,184,611
|
|
Less: Accumulated depreciation
|
|
|
(691,217
|
)
|
|
|
(700,063
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
473,230
|
|
|
$
|
484,548
|
|
|
|
|
|
|
|
|
|
|
ACCRUED LIABILITIES
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
$
|
93,226
|
|
|
$
|
93,232
|
|
Product warranty obligation
|
|
|
22,007
|
|
|
|
22,761
|
|
Restructuring
|
|
|
29,951
|
|
|
|
29,203
|
|
Other
|
|
|
100,886
|
|
|
|
95,808
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
246,070
|
|
|
$
|
241,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(In thousands)
|
|
ALLOWANCES FOR POSSIBLE LOSSES ON ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year
|
|
$
|
8,555
|
|
|
$
|
10,446
|
|
|
$
|
9,547
|
|
Additions charged to expense
|
|
|
4,124
|
|
|
|
630
|
|
|
|
2,974
|
|
Write-offs
|
|
|
(2,304
|
)
|
|
|
(1,872
|
)
|
|
|
(2,243
|
)
|
Foreign currency translation adjustments and other
|
|
|
(118
|
)
|
|
|
(649
|
)
|
|
|
168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
$
|
10,257
|
|
|
$
|
8,555
|
|
|
$
|
10,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(In thousands)
|
|
Income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
397,215
|
|
|
$
|
502,292
|
|
|
$
|
495,516
|
|
Foreign
|
|
|
295,888
|
|
|
|
304,088
|
|
|
|
309,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
693,103
|
|
|
$
|
806,380
|
|
|
$
|
804,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
116,898
|
|
|
$
|
130,996
|
|
|
$
|
128,635
|
|
Foreign
|
|
|
63,170
|
|
|
|
66,691
|
|
|
|
60,606
|
|
State
|
|
|
6,509
|
|
|
|
11,376
|
|
|
|
12,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
186,577
|
|
|
|
209,063
|
|
|
|
201,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
5,273
|
|
|
|
1,711
|
|
|
|
19,870
|
|
Foreign
|
|
|
(8,434
|
)
|
|
|
(3,611
|
)
|
|
|
1,552
|
|
State
|
|
|
(2,471
|
)
|
|
|
8,358
|
|
|
|
(2,752
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(5,632
|
)
|
|
|
6,458
|
|
|
|
18,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision
|
|
$
|
180,945
|
|
|
$
|
215,521
|
|
|
$
|
220,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Significant components of the deferred tax (asset) liability were as
follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Current deferred tax (asset) liability:
|
|
|
|
|
|
|
|
|
Reserves not currently deductible
|
|
$
|
(39,509
|
)
|
|
$
|
(37,771
|
)
|
Share-based compensation
|
|
|
(7,022
|
)
|
|
|
(7,218
|
)
|
Net operating loss carryforwards
|
|
|
(2,072
|
)
|
|
|
(368
|
)
|
Other
|
|
|
(1,041
|
)
|
|
|
353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49,644
|
)
|
|
|
(45,004
|
)
|
Portion included in other current liabilities
|
|
|
(360
|
)
|
|
|
(1,720
|
)
|
|
|
|
|
|
|
|
|
|
Gross current deferred tax asset
|
|
|
(50,004
|
)
|
|
|
(46,724
|
)
|
|
|
|
|
|
|
|
|
|
Noncurrent deferred tax (asset) liability:
|
|
|
|
|
|
|
|
|
Differences in basis of property and accelerated depreciation
|
|
|
54,243
|
|
|
|
57,581
|
|
Reserves not currently deductible
|
|
|
(28,808
|
)
|
|
|
(28,809
|
)
|
Pensions
|
|
|
8,714
|
|
|
|
6,736
|
|
Differences in basis of intangible assets and accelerated amortization
|
|
|
603,577
|
|
|
|
597,266
|
|
Net operating loss carryforwards
|
|
|
(8,399
|
)
|
|
|
(5,722
|
)
|
Share-based compensation
|
|
|
(13,707
|
)
|
|
|
(11,607
|
)
|
Foreign tax credit carryforwards
|
|
|
(3,441
|
)
|
|
|
|
|
Other
|
|
|
3,477
|
|
|
|
1,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
615,656
|
|
|
|
616,856
|
|
Less: Valuation allowance
|
|
|
2,046
|
|
|
|
2,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
617,702
|
|
|
|
619,696
|
|
Portion included in noncurrent assets
|
|
|
4,074
|
|
|
|
4,350
|
|
|
|
|
|
|
|
|
|
|
Gross noncurrent deferred tax liability
|
|
|
621,776
|
|
|
|
624,046
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
571,772
|
|
|
$
|
577,322
|
|
|
|
|
|
|
|
|
|
|
The Companys effective tax rate reconciles to the U.S. Federal statutory rate as
follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
U.S. Federal statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State income taxes, net of federal income tax benefit
|
|
|
0.4
|
|
|
|
1.2
|
|
|
|
0.9
|
|
Foreign operations, net
|
|
|
(7.1
|
)
|
|
|
(6.8
|
)
|
|
|
(6.1
|
)
|
U.S. Manufacturing deduction and credits
|
|
|
(2.6
|
)
|
|
|
(2.4
|
)
|
|
|
(2.2
|
)
|
Other
|
|
|
0.4
|
|
|
|
(0.3
|
)
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated effective tax rate
|
|
|
26.1
|
%
|
|
|
26.7
|
%
|
|
|
27.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016 and 2015, U.S. and foreign deferred income taxes totaling
$4.5 million and $6.9 million were provided on undistributed earnings of certain non-U.S. subsidiaries that are not expected to be permanently reinvested in such subsidiaries. There has been no provision for U.S. deferred income
taxes for the
68
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
undistributed earnings of certain other subsidiaries, which total approximately $1,126.9 million and $1,075.0 million at December 31, 2016 and 2015, respectively, because the
Company intends to reinvest these earnings indefinitely in operations outside the United States. Upon distribution of those earnings to the United States, the Company would be subject to U.S. income taxes 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, 2016, the Company had tax effected benefits of $10.4 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 $4.6 million for federal income tax purposes with no valuation allowance, $4.5 million for state income tax
purposes with no valuation allowance and $1.3 million for foreign income tax purposes with a valuation allowance of $1.5 million. These net operating loss carryforwards, if not used, will expire between 2017 and 2036.
At December 31, 2016, the Company had tax effected benefits of $4.1 million related to tax credit
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 tax credit carryforwards of $1.1 million for federal income
tax purposes with a valuation allowance of $0.5 million, $2.9 million for state income tax purposes with no valuation allowance and $0.1 million for foreign income tax purposes with no valuation allowance. These tax credit
carryforwards, if not used, will expire between 2017 and 2036.
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 foreign net operating loss carryforwards and tax credits. In 2016, the Company
recorded a decrease of $0.8 million in the valuation allowance primarily related to federal tax credits that are not expected to be utilized.
At December 31, 2016, the Company had gross unrecognized tax benefits of $57.9 million, of which $48.5 million, if recognized, would impact the effective tax rate. At December 31,
2015, the Company had gross unrecognized tax benefits of $63.8 million, of which $52.9 million, if recognized, would impact the effective tax rate.
At December 31, 2016 and 2015, the Company reported $8.9 million and $10.7 million, respectively, related to interest and penalty exposure as accrued income tax expense in the consolidated
balance sheet. During 2016 and 2015, the Company recognized a net benefit of $1.8 million and $0.4 million, respectively, and during 2014, the Company recognized a net expense of $2.5 million, for interest and penalties related to
uncertain tax positions in the consolidated statement of income as a component of income tax expense.
The
most significant tax jurisdiction for the Company is the United States. The Company files income tax returns in various other 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. At December 31, 2016, there were no tax years currently under examination by the Internal Revenue Service (IRS). 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 including state and foreign jurisdictions that remain subject to
examination. There have been no penalties asserted or imposed by the IRS related to substantial understatement of income, gross valuation misstatement or failure to disclose a listed or reportable transaction.
During 2016, the Company added $8.6 million of tax, interest and penalties to identified uncertain tax positions and
reversed $16.3 million of tax and interest related to statute expirations and settlement of prior
69
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
uncertain positions. During 2015, the Company added $12.0 million of tax, interest and penalties related to identified uncertain tax positions and reversed $20.3 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(In millions)
|
|
Balance at the beginning of the year
|
|
$
|
63.8
|
|
|
$
|
71.7
|
|
|
$
|
55.2
|
|
Additions for tax positions related to the current year
|
|
|
5.5
|
|
|
|
8.8
|
|
|
|
10.7
|
|
Additions for tax positions of prior years
|
|
|
1.5
|
|
|
|
1.3
|
|
|
|
16.8
|
|
Reductions for tax positions of prior years
|
|
|
(3.6
|
)
|
|
|
(7.1
|
)
|
|
|
(1.7
|
)
|
Reductions related to settlements with taxing authorities
|
|
|
(3.4
|
)
|
|
|
(8.3
|
)
|
|
|
(0.4
|
)
|
Reductions due to statute expirations
|
|
|
(5.9
|
)
|
|
|
(2.6
|
)
|
|
|
(8.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
$
|
57.9
|
|
|
$
|
63.8
|
|
|
$
|
71.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2016, the additions above primarily reflect the increase in tax liabilities for
uncertain tax positions related to certain domestic and foreign issues, while the reductions above primarily relate to statute expirations and settlement of domestic and foreign issues. At December 31, 2016, tax, interest and penalties of
$65.2 million were classified as a noncurrent liability. The net change in uncertain tax positions for the year ended December 31, 2016 resulted in a decrease to income tax expense of $6.2 million.
70
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Long-term debt, net consisted of the following at December 31:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
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
|
|
U.S. dollar 3.73% senior notes due September 2024
|
|
|
300,000
|
|
|
|
300,000
|
|
U.S. dollar 3.91% senior notes due June 2025
|
|
|
50,000
|
|
|
|
50,000
|
|
U.S. dollar 3.96% senior notes due August 2025
|
|
|
100,000
|
|
|
|
100,000
|
|
U.S. dollar 3.83% senior notes due September 2026
|
|
|
100,000
|
|
|
|
100,000
|
|
U.S. dollar 3.98% senior notes due September 2029
|
|
|
100,000
|
|
|
|
100,000
|
|
U.S. dollar 4.45% senior notes due August 2035
|
|
|
50,000
|
|
|
|
50,000
|
|
British pound 5.99% senior note due November 2016
|
|
|
|
|
|
|
59,049
|
|
British pound 4.68% senior note due September 2020
|
|
|
98,701
|
|
|
|
118,098
|
|
British pound 2.59% senior note due November 2028
|
|
|
185,067
|
|
|
|
|
|
British pound 2.70% senior note due November 2031
|
|
|
92,533
|
|
|
|
|
|
Euro 1.34% senior notes due October 2026
|
|
|
316,643
|
|
|
|
|
|
Euro 1.53% senior notes due October 2028
|
|
|
211,096
|
|
|
|
|
|
Swiss franc 2.44% senior note due December 2021
|
|
|
54,150
|
|
|
|
55,024
|
|
Revolving credit facility borrowings
|
|
|
|
|
|
|
314,100
|
|
Other, principally foreign
|
|
|
14,604
|
|
|
|
20,849
|
|
Less: Debt issuance costs
|
|
|
(6,229
|
)
|
|
|
(4,080
|
)
|
|
|
|
|
|
|
|
|
|
Total debt, net
|
|
|
2,341,565
|
|
|
|
1,938,040
|
|
Less: Current portion, net
|
|
|
(278,921
|
)
|
|
|
(384,924
|
)
|
|
|
|
|
|
|
|
|
|
Total long-term debt, net
|
|
$
|
2,062,644
|
|
|
$
|
1,553,116
|
|
|
|
|
|
|
|
|
|
|
Maturities of long-term debt borrowings outstanding at December 31, 2016 were as
follows: $308.8 million in 2018; $100.0 million in 2019; $98.7 million in 2020; $54.2 million in 2021; none in 2022; and $1,505.3 million in 2023 and thereafter.
In October 2016, the Company completed a private placement agreement to sell 500 million Euros and
225 million British pounds in senior notes to a group of institutional investors (the 2016 Private Placement). There were two funding dates under the 2016 Private Placement. The first funding occurred in October 2016 for
500 million Euros ($546.8 million), consisting of 300 million Euros ($328.1 million) in aggregate principal amount of 1.34% senior notes due October 2026 and 200 million Euros ($218.7 million) in aggregate
principal amount of 1.53% senior notes due October 2028. The second funding occurred in November 2016 for 225 million British pounds ($274.1 million), consisting of 150 million British pounds ($182.7 million) in
aggregate principal amount of 2.59% senior notes due November 2028 and 75 million British pounds ($91.4 million) in aggregate principal amount of 2.70% senior notes due November 2031. The 2016 Private
71
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Placement senior notes carry a weighted average interest rate of 1.82% and are subject to certain customary covenants, including financial covenants that, among other things, require the Company
to maintain certain
debt-to-EBITDA
(earnings before interest, income taxes, depreciation and amortization) and interest coverage ratios. The proceeds from the first
funding of the 2016 Private Placement were used to pay down domestic borrowings under the Companys revolving credit facility. The proceeds from the second funding of the 2016 Private Placement were used to pay down, at maturity, a
40 million British pound ($48.7 million) 5.99% senior note in November 2016 and provides the Company with additional financial flexibility to support its growth plans, including its acquisition strategy.
In December 2007, the Company issued $270 million in aggregate principal amount of 6.20% private placement senior
notes due December 2017 and $100 million in aggregate principal amount of 6.30% private placement senior notes due December 2019. In July 2008, the Company issued $80 million in aggregate principal amount of 6.35% private placement
senior notes due July 2018. In September 2008, the Company issued $160 million in aggregate principal amount of 7.08% private placement senior notes due September 2018. In December 2008, the Company issued $65 million in aggregate
principal amount of 7.18% private placement senior notes due December 2018. In September 2014, the Company issued $300 million in aggregate principal amount of 3.73% senior notes due September 2024, $100 million in aggregate
principal amount of 3.83% senior notes due September 2026 and $100 million in aggregate principal amount of 3.98% senior notes due September 2029. In June 2015, the Company issued $50 million in aggregate principal amount of
3.91% senior notes due June 2025. In August 2015, the Company issued $100 million in aggregate principal amount of 3.96% senior notes due August 2025 and $50 million in aggregate principal amount of 4.45% senior notes due
August 2035.
In November 2004, the Company issued a 40 million British pound 5.99% senior note due
November 2016 (paid in full, at maturity, as previously noted). In September 2010, the Company issued an 80 million British pound ($98.7 million at December 31, 2016) 4.68% senior note due September 2020. In December 2011,
the Company issued a 55 million Swiss franc ($54.2 million at December 31, 2016) 2.44% senior note due December 2021.
In March 2016, the Company along with certain of its foreign subsidiaries amended and restated its credit agreement dated as of September 22, 2011 (the Credit Agreement). The Credit
Agreement amends and restates the Companys existing $700 million revolving credit facility, which was due to expire in December 2018. The Credit Agreement consists of a five-year revolving credit facility in an aggregate principal
amount of $850 million with a final maturity date in March 2021. The revolving credit facility total borrowing capacity excludes an accordion feature that permits the Company to request up to an additional $300 million in revolving
credit commitments at any time during the life of the Credit Agreement under certain conditions. The Credit Agreement places certain restrictions on allowable additional indebtedness. At December 31, 2016, the Company had available borrowing
capacity of $1,117.3 million under its revolving credit facility, including the $300 million accordion feature.
Interest rates on outstanding borrowings under the revolving credit facility are at the applicable benchmark rate plus a negotiated spread or at the U.S. prime rate. At December 31, 2016, the Company
did not have any borrowings outstanding under the revolving credit facility. At December 31, 2015, the Company had $314.1 million of borrowings outstanding under the revolving credit facility. The weighted average interest rate on the
revolving credit facility for the years ended December 31, 2016 and 2015 was 1.72% and 1.37%, respectively. The Company had outstanding letters of credit primarily under the revolving credit facility totaling $33.2 million and
$36.9 million at December 31, 2016 and 2015, respectively.
72
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The private placements, 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, 2016.
Foreign subsidiaries of the Company had available credit facilities with local foreign lenders of $43.7 million and $37.5 million at December 31, 2016 and 2015, respectively. Foreign
subsidiaries had debt borrowings outstanding totaling $14.6 million and $20.9 million, including $3.8 million and $7.9 million reported in long-term debt, net at December 31, 2016 and 2015, respectively.
The weighted average interest rate on total debt borrowings outstanding at December 31, 2016 and 2015 was 4.4% and
5.2%, respectively.
10.
|
Share-Based Compensation
|
Under the terms of the Companys stockholder-approved share-based plans, incentive and non-qualified stock options and restricted stock 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 generally has a
four-year
cliff vesting. Stock options generally have a maximum contractual term of seven years. At December 31, 2016, 14.0 million shares of Company common stock were reserved for issuance under the
Companys share-based plans, including 6.0 million shares for stock options outstanding.
The
Company issues previously unissued shares when stock 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.
Total share-based compensation expense was as follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(In thousands)
|
|
Stock option expense
|
|
$
|
9,984
|
|
|
$
|
10,955
|
|
|
$
|
9,130
|
|
Restricted stock expense
|
|
|
12,046
|
|
|
|
12,807
|
|
|
|
10,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pre-tax expense
|
|
|
22,030
|
|
|
|
23,762
|
|
|
|
19,871
|
|
Related tax benefit
|
|
|
(6,846
|
)
|
|
|
(7,623
|
)
|
|
|
(6,154
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction of net income
|
|
$
|
15,184
|
|
|
$
|
16,139
|
|
|
$
|
13,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax share-based compensation expense is included in the consolidated statement of
income in either Cost of sales or Selling, general and administrative expenses, depending on where the recipients cash compensation is reported.
73
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The fair value of each stock 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 stock options granted during the years indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Expected volatility
|
|
|
21.8
|
%
|
|
|
22.3
|
%
|
|
|
23.9
|
%
|
Expected term (years)
|
|
|
5.0
|
|
|
|
5.0
|
|
|
|
5.0
|
|
Risk-free interest rate
|
|
|
1.23
|
%
|
|
|
1.58
|
%
|
|
|
1.63
|
%
|
Expected dividend yield
|
|
|
0.77
|
%
|
|
|
0.69
|
%
|
|
|
0.45
|
%
|
Black-Scholes-Merton fair value per stock option granted
|
|
$
|
9.14
|
|
|
$
|
10.89
|
|
|
$
|
12.21
|
|
Expected volatility is based on the historical volatility of the Companys stock.
The Company used historical exercise data to estimate the stock options expected term, which represents the period of time that the stock options granted are expected to be outstanding. Management anticipates that the future stock option
holding periods will be similar to the historical stock option holding periods. The risk-free interest rate for periods within the expected term of the stock 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.
The following is a summary of the Companys stock option activity and related information for the year ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
(In thousands)
|
|
|
|
|
|
(Years)
|
|
|
(In millions)
|
|
Outstanding at the beginning of the year
|
|
|
5,659
|
|
|
$
|
39.49
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,471
|
|
|
|
46.97
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(713
|
)
|
|
|
25.72
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(329
|
)
|
|
|
49.40
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(77
|
)
|
|
|
52.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at the end of the year
|
|
|
6,011
|
|
|
$
|
42.25
|
|
|
|
3.9
|
|
|
$
|
45.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at the end of the year
|
|
|
3,209
|
|
|
$
|
36.39
|
|
|
|
2.5
|
|
|
$
|
42.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of stock options exercised during 2016, 2015 and 2014 was
$16.2 million, $62.3 million and $25.7 million, respectively. The total fair value of stock options vested during 2016, 2015 and 2014 was $10.8 million, $10.3 million and $8.9 million, respectively.
74
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a summary of the Companys nonvested stock option
activity and related information for the year ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
Average
Grant
Date
Fair Value
|
|
|
|
(In thousands)
|
|
|
|
|
Nonvested stock options outstanding at the beginning of the year
|
|
|
2,717
|
|
|
$
|
10.85
|
|
Granted
|
|
|
1,471
|
|
|
|
9.14
|
|
Vested
|
|
|
(1,057
|
)
|
|
|
10.22
|
|
Forfeited
|
|
|
(329
|
)
|
|
|
10.54
|
|
|
|
|
|
|
|
|
|
|
Nonvested stock options outstanding at the end of the year
|
|
|
2,802
|
|
|
$
|
10.15
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016, there was approximately $19 million of expected future
pre-tax
compensation expense related to the 2.8 million nonvested stock options outstanding, 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 grants 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.
The following is a summary of the Companys nonvested restricted stock activity and related information for the year
ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
Average
Grant
Date
Fair Value
|
|
|
|
(In thousands)
|
|
|
|
|
Nonvested restricted stock outstanding at the beginning of the year
|
|
|
1,061
|
|
|
$
|
46.32
|
|
Granted
|
|
|
376
|
|
|
|
46.91
|
|
Vested
|
|
|
(292
|
)
|
|
|
38.13
|
|
Forfeited
|
|
|
(126
|
)
|
|
|
48.66
|
|
|
|
|
|
|
|
|
|
|
Nonvested restricted stock outstanding at the end of the year
|
|
|
1,019
|
|
|
$
|
48.59
|
|
|
|
|
|
|
|
|
|
|
The total fair value of restricted stock vested was $11.1 million,
$10.6 million and $3.6 million in 2016, 2015 and 2014, respectively. The weighted average fair value of restricted stock granted per share during 2016 and 2015 was $46.91 and $52.31, respectively. As of December 31, 2016, there was
approximately $28 million of expected future
pre-tax
compensation expense related to the 1.0 million nonvested restricted shares outstanding, which is expected to be recognized over a weighted
average period of less than two years.
75
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11.
|
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 $52 million to $56 million to its worldwide defined benefit pension plans in 2017. The estimated cash contributions range includes $50.1 million in cash contributions to its defined benefit pension plans in
January 2017, with $40.0 million contributed to U.S. defined benefit pension plans and $10.1 million contributed to foreign defined benefit pension plans.
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 retirement and savings plan may contribute a specified portion of their compensation on a
pre-tax
basis, which varies by location. The Company matches employee contributions ranging from
20% to 100%, up to a maximum percentage ranging from 1% to 8% of eligible compensation or up to a maximum of $1,200 per participant in some locations.
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
has nonqualified unfunded retirement plans for its Directors and certain retired employees. It also provides supplemental retirement benefits, through contractual arrangements and/or a Supplemental Executive Retirement Plan (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.
76
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:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
|
Net projected benefit obligation at the beginning of the year
|
|
$
|
472,477
|
|
|
$
|
491,373
|
|
Service cost
|
|
|
3,488
|
|
|
|
3,924
|
|
Interest cost
|
|
|
22,153
|
|
|
|
20,761
|
|
Actuarial losses (gains)
|
|
|
29,681
|
|
|
|
(27,605
|
)
|
Gross benefits paid
|
|
|
(29,005
|
)
|
|
|
(27,930
|
)
|
Plan amendments
|
|
|
56
|
|
|
|
|
|
Acquisition
|
|
|
|
|
|
|
11,954
|
|
|
|
|
|
|
|
|
|
|
Net projected benefit obligation at the end of the year
|
|
$
|
498,850
|
|
|
$
|
472,477
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at the beginning of the year
|
|
$
|
508,775
|
|
|
$
|
498,923
|
|
Actual return on plan assets
|
|
|
36,414
|
|
|
|
(21,020
|
)
|
Employer contributions
|
|
|
889
|
|
|
|
50,726
|
|
Gross benefits paid
|
|
|
(29,005
|
)
|
|
|
(27,930
|
)
|
Acquisition
|
|
|
|
|
|
|
8,076
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at the end of the year
|
|
$
|
517,073
|
|
|
$
|
508,775
|
|
|
|
|
|
|
|
|
|
|
77
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Foreign Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
|
Net projected benefit obligation at the beginning of the year
|
|
$
|
243,924
|
|
|
$
|
197,671
|
|
Service cost
|
|
|
3,134
|
|
|
|
3,076
|
|
Interest cost
|
|
|
7,896
|
|
|
|
7,910
|
|
Foreign currency translation adjustments
|
|
|
(39,910
|
)
|
|
|
(14,337
|
)
|
Employee contributions
|
|
|
256
|
|
|
|
303
|
|
Actuarial losses (gains)
|
|
|
52,248
|
|
|
|
(6,892
|
)
|
Expenses paid from assets
|
|
|
(770
|
)
|
|
|
(610
|
)
|
Gross benefits paid
|
|
|
(8,475
|
)
|
|
|
(8,064
|
)
|
Plan amendments
|
|
|
(6
|
)
|
|
|
|
|
Acquisition
|
|
|
|
|
|
|
64,867
|
|
|
|
|
|
|
|
|
|
|
Net projected benefit obligation at the end of the year
|
|
$
|
258,297
|
|
|
$
|
243,924
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at the beginning of the year
|
|
$
|
213,296
|
|
|
$
|
159,907
|
|
Actual return on plan assets
|
|
|
14,346
|
|
|
|
7,471
|
|
Employer contributions
|
|
|
5,886
|
|
|
|
4,490
|
|
Employee contributions
|
|
|
256
|
|
|
|
303
|
|
Foreign currency translation adjustments
|
|
|
(35,604
|
)
|
|
|
(10,584
|
)
|
Expenses paid from assets
|
|
|
(770
|
)
|
|
|
(610
|
)
|
Gross benefits paid
|
|
|
(8,475
|
)
|
|
|
(8,064
|
)
|
Acquisition
|
|
|
|
|
|
|
60,383
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at the end of the year
|
|
$
|
188,935
|
|
|
$
|
213,296
|
|
|
|
|
|
|
|
|
|
|
The accumulated benefit obligation consisted of the following at December 31:
U.S. Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Funded plans
|
|
$
|
480,249
|
|
|
$
|
454,498
|
|
Unfunded plans
|
|
|
6,212
|
|
|
|
5,481
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
486,461
|
|
|
$
|
459,979
|
|
|
|
|
|
|
|
|
|
|
78
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Foreign Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Funded plans
|
|
$
|
213,877
|
|
|
$
|
203,229
|
|
Unfunded plans
|
|
|
33,924
|
|
|
|
30,327
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
247,801
|
|
|
$
|
233,556
|
|
|
|
|
|
|
|
|
|
|
Weighted average assumptions used to determine benefit obligations at December 31:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
U.S. Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.25
|
%
|
|
|
4.80
|
%
|
Rate of compensation increase (where applicable)
|
|
|
3.75
|
%
|
|
|
3.75
|
%
|
Foreign Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
2.56
|
%
|
|
|
3.62
|
%
|
Rate of compensation increase (where applicable)
|
|
|
2.50
|
%
|
|
|
2.88
|
%
|
The following is a summary of the fair value of plan assets for U.S. plans at
December 31, 2016 and 2015 in accordance with the retrospective adoption of ASU
No. 2015-07,
Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its
Equivalent
)
(ASU 2015-07).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Asset Class
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
|
(In thousands)
|
|
Corporate debt instruments
|
|
$
|
2,662
|
|
|
$
|
|
|
|
$
|
2,662
|
|
|
$
|
5,617
|
|
|
$
|
|
|
|
$
|
5,617
|
|
Corporate debt instruments - Preferred
|
|
|
8,880
|
|
|
|
|
|
|
|
8,880
|
|
|
|
9,835
|
|
|
|
|
|
|
|
9,835
|
|
Corporate stocks - Common
|
|
|
109,881
|
|
|
|
109,881
|
|
|
|
|
|
|
|
118,673
|
|
|
|
118,673
|
|
|
|
|
|
Municipal bonds
|
|
|
777
|
|
|
|
|
|
|
|
777
|
|
|
|
1,003
|
|
|
|
|
|
|
|
1,003
|
|
Registered investment companies
|
|
|
251,054
|
|
|
|
251,054
|
|
|
|
|
|
|
|
202,522
|
|
|
|
202,522
|
|
|
|
|
|
U.S. Government securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113
|
|
|
|
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
|
373,254
|
|
|
|
360,935
|
|
|
|
12,319
|
|
|
|
337,763
|
|
|
|
321,195
|
|
|
|
16,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments measured at net asset value
|
|
|
143,819
|
|
|
|
|
|
|
|
|
|
|
|
171,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
517,073
|
|
|
$
|
360,935
|
|
|
$
|
12,319
|
|
|
$
|
508,775
|
|
|
$
|
321,195
|
|
|
$
|
16,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. equity securities and global equity securities categorized as level 1 are
traded on national and international exchanges and are valued at their closing prices on the last trading day of the year. For U.S. equity securities and global equity securities not traded on an active exchange, or if the closing price is not
available, the trustee obtains indicative quotes from a pricing vendor, broker or investment manager. These securities are categorized as level 2 if the custodian obtains corroborated quotes from a pricing vendor. Additionally, some U.S. equity
securities and global equity securities are public investment vehicles valued using the Net Asset Value (NAV) provided by the fund manager. The NAV is the total value of the fund divided by the number of shares outstanding.
79
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fixed income securities categorized as level 1 are traded on
national and international exchanges and are valued at their closing prices on the last trading day of the year and categorized as level 2 if valued by the trustee using pricing models that use verifiable observable market data, bids provided
by brokers or dealers or quoted prices of securities with similar characteristics.
Alternative investments
categorized as level 3 are valued based on unobservable inputs and cannot be corroborated using verifiable observable market data. Investments in level 3 funds are redeemable, however, cash reimbursement may be delayed or a portion held back
until asset finalization.
The expected long-term rate of return on these plan assets was 7.75% in both 2016
and 2015. Equity securities included 512,565 shares of AMETEK, Inc. common stock with a market value of $24.9 million (4.8% of total plan investment assets) at December 31, 2016 and 512,565 shares of AMETEK, Inc. common stock
with a market value of $27.5 million (5.4% of total plan investment assets) at December 31, 2015.
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 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
target allocations for the U.S. defined benefits plans are approximately 50% equity securities, 20% fixed-income securities and 30% other securities and/or cash.
The equity portfolio is diversified by market capitalization and style. The equity portfolio also includes international
components.
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, 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.
The following is a summary of the fair value of plan assets for foreign
defined benefit pension plans at December 31, 2016 and 2015 in accordance with the retrospective adoption of
ASU 2015-07.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Asset Class
|
|
Total
|
|
|
Level 3
|
|
|
Total
|
|
|
Level 3
|
|
|
|
(In thousands)
|
|
Life insurance
|
|
$
|
18,147
|
|
|
$
|
18,147
|
|
|
$
|
20,486
|
|
|
$
|
20,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
|
18,147
|
|
|
|
18,147
|
|
|
|
20,486
|
|
|
|
20,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments measured at net asset value
|
|
|
170,788
|
|
|
|
|
|
|
|
192,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
188,935
|
|
|
$
|
18,147
|
|
|
$
|
213,296
|
|
|
$
|
20,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Life insurance assets are considered level 3 investments as their
values are determined by the sponsor using unobservable market data.
The following is a summary of the
changes in the fair value of the foreign plans level 3 investments (fair value determined using significant unobservable inputs):
|
|
|
|
|
|
|
Life Insurance
|
|
|
|
(In thousands)
|
|
Balance, December 31, 2014
|
|
$
|
8,888
|
|
Actual return on assets:
|
|
|
|
|
Unrealized (losses) relating to instruments still held at the end of the year
|
|
|
(980
|
)
|
Realized gains (losses) relating to assets sold during the year
|
|
|
|
|
Purchases, sales, issuances and settlements, net
|
|
|
12,578
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
|
20,486
|
|
|
|
|
|
|
Actual return on assets:
|
|
|
|
|
Unrealized (losses) relating to instruments still held at the end of the year
|
|
|
(2,339
|
)
|
Realized gains (losses) relating to assets sold during the year
|
|
|
|
|
Purchases, sales, issuances and settlements, net
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2016
|
|
$
|
18,147
|
|
|
|
|
|
|
The objective of AMETEK, Inc.s foreign defined benefit plans investment
strategy is to maximize the long-term rate of return on plan investments, subject to a reasonable level of risk. Liability studies are also performed on a regular basis to provide guidance in setting investment goals with an objective to balance
risks against the current and future needs of the plans. The trustees consider the risk associated with the different asset classes, relative to the plans liabilities and how this can be affected by diversification, and the relative returns
available on equities, fixed-income investments, real estate and cash. Also, the likely volatility of those returns and the cash flow requirements of the plans are considered. It is expected that equities will outperform fixed-income investments
over the long term. However, the trustees recognize the fact that fixed-income investments may better match the liabilities for pensioners. Because of the relatively young active employee group covered by the plans and the immature nature of the
plans, the trustees have chosen to adopt an asset allocation strategy more heavily weighted toward equity investments. This asset allocation strategy will be reviewed, from time to time, in view of changes in market conditions and in the plans
liability profile. The target allocations for the foreign defined benefit plans are approximately 70% equity securities, 15% fixed-income securities and 15% other securities, insurance or cash.
The assumption for the expected return on plan assets was developed based on a review of historical investment returns
for the investment categories for the defined benefit pension assets. This review also considered current capital market conditions and projected future investment returns. The estimates of future capital market returns by asset class are lower than
the actual long-term historical returns. The current low interest rate environment influences this outlook. Therefore, the assumed rate of return for U.S. plans is 7.50% and 6.79% for foreign plans in 2017.
81
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The projected benefit obligation, accumulated benefit obligation and
fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets and pension plans with an accumulated benefit obligation in excess of plan assets were as follows at December 31:
U.S. Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected Benefit
|
|
|
Accumulated Benefit
|
|
|
|
Obligation Exceeds Fair
|
|
|
Obligation Exceeds Fair
|
|
|
|
Value of Assets
|
|
|
Fair Value of Assets
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Benefit obligation
|
|
$
|
26,356
|
|
|
$
|
5,481
|
|
|
$
|
26,356
|
|
|
$
|
5,481
|
|
Fair value of plan assets
|
|
|
19,059
|
|
|
|
|
|
|
|
19,059
|
|
|
|
|
|
Foreign Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected Benefit
|
|
|
Accumulated Benefit
|
|
|
|
Obligation Exceeds
|
|
|
Obligation Exceeds
|
|
|
|
Fair Value of Assets
|
|
|
Fair Value of Assets
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Benefit obligation
|
|
$
|
215,893
|
|
|
$
|
161,711
|
|
|
$
|
209,377
|
|
|
$
|
155,169
|
|
Fair value of plan assets
|
|
|
146,480
|
|
|
|
119,045
|
|
|
|
146,480
|
|
|
|
119,045
|
|
The following table provides the amounts recognized in the consolidated balance sheet at
December 31:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Funded status asset (liability):
|
|
|
|
|
|
|
|
|
Fair value of plan assets
|
|
$
|
706,008
|
|
|
$
|
722,071
|
|
Projected benefit obligation
|
|
|
(757,147
|
)
|
|
|
(716,401
|
)
|
|
|
|
|
|
|
|
|
|
Funded status at the end of the year
|
|
$
|
(51,139
|
)
|
|
$
|
5,670
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheet consisted of:
|
|
|
|
|
|
|
|
|
Noncurrent asset for pension benefits (other assets)
|
|
$
|
25,571
|
|
|
$
|
53,817
|
|
Current liabilities for pension benefits
|
|
|
(1,393
|
)
|
|
|
(1,001
|
)
|
Noncurrent liability for pension benefits
|
|
|
(75,317
|
)
|
|
|
(47,146
|
)
|
|
|
|
|
|
|
|
|
|
Net amount recognized at the end of the year
|
|
$
|
(51,139
|
)
|
|
$
|
5,670
|
|
|
|
|
|
|
|
|
|
|
The following table provides the amounts recognized in accumulated other comprehensive
income, net of taxes, at December 31:
|
|
|
|
|
|
|
|
|
Net amounts recognized:
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Net actuarial loss
|
|
$
|
204,782
|
|
|
$
|
156,351
|
|
Prior service costs
|
|
|
(1,031
|
)
|
|
|
(1,321
|
)
|
Transition asset
|
|
|
7
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
Total recognized
|
|
$
|
203,758
|
|
|
$
|
155,038
|
|
|
|
|
|
|
|
|
|
|
82
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table provides the components of net periodic pension
benefit expense (income) for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(In thousands)
|
|
Defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
6,622
|
|
|
$
|
7,000
|
|
|
$
|
6,153
|
|
Interest cost
|
|
|
30,049
|
|
|
|
28,670
|
|
|
|
28,931
|
|
Expected return on plan assets
|
|
|
(51,140
|
)
|
|
|
(54,819
|
)
|
|
|
(50,196
|
)
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
|
10,224
|
|
|
|
9,383
|
|
|
|
4,483
|
|
Prior service costs
|
|
|
(52
|
)
|
|
|
(55
|
)
|
|
|
(51
|
)
|
Transition asset
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net periodic benefit (income) expense
|
|
|
(4,296
|
)
|
|
|
(9,820
|
)
|
|
|
(10,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined contribution plans
|
|
|
23,881
|
|
|
|
22,750
|
|
|
|
20,714
|
|
Foreign plans and other
|
|
|
5,694
|
|
|
|
4,800
|
|
|
|
5,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other plans
|
|
|
29,575
|
|
|
|
27,550
|
|
|
|
26,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net pension expense
|
|
$
|
25,279
|
|
|
$
|
17,730
|
|
|
$
|
15,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total net periodic benefit expense (income) is included in Cost of sales in the
consolidated statement of income. The estimated amount that will be amortized from accumulated other comprehensive income into net periodic pension benefit expense in 2017 for the net actuarial losses and prior service costs is expected to be
$14.0 million.
The following weighted average assumptions were used to determine the above net periodic
pension benefit expense for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
U.S. Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.80
|
%
|
|
|
4.20
|
%
|
|
|
5.00
|
%
|
Expected return on plan assets
|
|
|
7.75
|
%
|
|
|
7.75
|
%
|
|
|
7.75
|
%
|
Rate of compensation increase (where applicable)
|
|
|
3.75
|
%
|
|
|
3.75
|
%
|
|
|
3.75
|
%
|
Foreign Defined Benefit Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
3.62
|
%
|
|
|
3.44
|
%
|
|
|
4.38
|
%
|
Expected return on plan assets
|
|
|
6.95
|
%
|
|
|
6.92
|
%
|
|
|
6.93
|
%
|
Rate of compensation increase (where applicable)
|
|
|
2.88
|
%
|
|
|
2.88
|
%
|
|
|
2.92
|
%
|
Estimated Future Benefit Payments
The estimated future benefit payments for U.S. and foreign plans are as follows: 2017
- $37.3 million;
2018 - $38.5 million;
2019 - $39.4 million;
2020 - $40.5 million;
2021 - $41.2 million;
2022 to
2026 - $217.5 million.
Future benefit
payments primarily represent amounts to be paid from pension trust assets. Amounts included that are to be paid from the Companys assets are not significant in any individual year.
83
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Postretirement Plans and Postemployment Benefits
The Company provides limited postretirement benefits other than pensions for certain retirees and a small number of
former employees. Benefits under these arrangements are not funded and are not significant.
The Company also
provides limited postemployment benefits for certain former or inactive employees after employment but before retirement. Those benefits are not significant in amount.
The Company has a deferred compensation plan, which allows employees whose compensation exceeds the statutory IRS limit
for retirement benefits to defer a portion of earned bonus compensation. The plan permits deferred amounts to be deemed invested in either, or a combination of, (a) an interest-bearing account, benefits from which are payable out of the general
assets of the Company, or (b) the equivalent of a fund which invests in shares of the Companys common stock on behalf of the employee. The amount deferred under the plan, including income earned, was $25.2 million and $23.4 million
at December 31, 2016 and 2015, respectively. Administrative expense for the deferred compensation plan is borne by the Company and is not significant.
The Company does not provide significant guarantees on a routine basis. The Company primarily issues guarantees,
stand-by
letters of credit and surety bonds in the
ordinary course of its business to provide financial or performance assurance to third parties on behalf of its consolidated subsidiaries to support or enhance the subsidiarys stand-alone creditworthiness. The amounts subject to certain of
these agreements vary depending on the covered contracts actually outstanding at any particular point in time. At December 31, 2016, the maximum amount of future payment obligations relative to these various guarantees was $70.2 million
and the outstanding liability under certain of those guarantees was $9.9 million.
Indemnifications
In conjunction with certain acquisition and divestiture transactions, the Company may agree to make payments to
compensate or indemnify other parties for possible future unfavorable financial consequences resulting from specified events (e.g., breaches of contract obligations or retention of previously existing environmental, tax or employee liabilities)
whose terms range in duration and often are not explicitly defined. Where appropriate, the obligation for such indemnifications is recorded as a liability. Because the amount of these types of indemnifications generally is not specifically stated,
the overall maximum amount of the obligation under such indemnifications cannot be reasonably estimated. Further, the Company indemnifies its directors and officers for claims against them in connection with their positions with the Company.
Historically, any such costs incurred to settle claims related to these indemnifications have been minimal for the Company. The Company believes that future payments, if any, under all existing indemnification agreements would not have a material
impact on its consolidated results of operations, financial position or cash flows.
Product Warranties
The Company provides limited warranties in connection with the sale of its products. The warranty periods for products
sold vary among the Companys operations, but generally do not exceed one year. The Company calculates its warranty expense provision based on its historical warranty experience and adjustments are made periodically to reflect actual warranty
expenses.
84
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Changes in the accrued product warranty obligation were as follows at
December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(In thousands)
|
|
Balance at the beginning of the year
|
|
$
|
22,761
|
|
|
$
|
29,764
|
|
|
$
|
28,036
|
|
Accruals for warranties issued during the year
|
|
|
16,046
|
|
|
|
14,817
|
|
|
|
16,463
|
|
Settlements made during the year
|
|
|
(17,732
|
)
|
|
|
(19,905
|
)
|
|
|
(17,636
|
)
|
Warranty accruals related to acquired businesses and other during the year
|
|
|
932
|
|
|
|
(1,915
|
)
|
|
|
2,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
$
|
22,007
|
|
|
$
|
22,761
|
|
|
$
|
29,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain settlements of warranties made during the period were for specific nonrecurring
warranty obligations. Product warranty obligations are reported as current liabilities in the consolidated balance sheet.
Asbestos Litigation
The Company (including its subsidiaries) has been named as a defendant in a number of asbestos-related lawsuits. Certain of these lawsuits relate to a business which was acquired by the Company and do not
involve products which were manufactured or sold by the Company. In connection with these lawsuits, the seller of such business has agreed to indemnify the Company against these claims (the Indemnified Claims). The Indemnified Claims
have been tendered to, and are being defended by, such seller. The seller has met its obligations, in all respects, and the Company does not have any reason to believe such party would fail to fulfill its obligations in the future. To date, no
judgments have been rendered against the Company as a result of any asbestos-related lawsuit. The Company believes it has strong defenses to the claims being asserted and intends to continue to vigorously defend itself in these matters.
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. At December 31, 2016, the
Company is named a Potentially Responsible Party (PRP) at 13 non-AMETEK-owned former waste disposal or treatment sites (the non-owned sites). The Company is identified as a de minimis party in 12 of these sites
based on the low volume of waste attributed to the Company relative to the amounts attributed to other named PRPs. In eight 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. At the remaining site 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 obligations. 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
85
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
certain instances, the Company has developed a range of estimates for such costs and has recorded a liability based on the best estimate. 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, 2016 and 2015 were $28.4 million and
$30.5 million, respectively, for both non-owned and owned sites. In 2016, the Company recorded $4.1 million in reserves. Additionally, the Company spent $5.4 million on environmental matters and the reserve decreased $0.8 million
due to foreign currency translation in 2016. The Companys reserves for environmental liabilities at December 31, 2016 and 2015 include reserves of $12.4 million and $11.5 million, respectively, for an owned site acquired in
connection with the 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 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, 2016, the Company had $11.9 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 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.
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 on presently available information and the Companys
historical 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 results of operations, financial position
or cash flows of the Company.
14.
|
Leases and Other Commitments
|
Minimum aggregate rental commitments under noncancellable leases in effect at December 31, 2016 (principally for production and administrative facilities and equipment) amounted to
$143.5 million, consisting of payments of $33.0 million in 2017, $25.2 million in 2018, $19.4 million in 2019, $14.5 million in 2020, $12.2 million in 2021 and $39.2 million thereafter. The leases expire over a
range of years from 2017 to 2082, with renewal or purchase options, subject to various terms and conditions, contained in most of the leases. Rental expense was $46.3 million in 2016, $43.6 million in 2015 and $44.6 million in 2014.
As of December 31, 2016 and 2015, the Company had $289.1 million and $321.7 million,
respectively, in purchase obligations outstanding, which primarily consisted of contractual commitments to purchase certain inventories at fixed prices.
86
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15.
|
Reportable Segments and Geographic Areas Information
|
Descriptive Information about Reportable Segments
The
Company has two reportable segments, EIG and EMG. The Companys operating segments are identified based on the existence of segment managers. Certain of the Companys operating segments have been aggregated for segment reporting purposes
primarily on the basis of product type, production processes, distribution methods and similarity of economic characteristics.
EIG manufactures advanced instruments for the process, power and industrial, and aerospace markets. It provides process and analytical instruments for the oil, gas, petrochemical, pharmaceutical,
semiconductor and automation markets. It provides instruments for the laboratory equipment, ultraprecision manufacturing, medical, and test and measurement markets. It makes power quality monitoring and metering devices, industrial battery chargers
and uninterruptible power supplies, programmable power equipment, electrical test equipment and gas turbine sensors. It provides dashboard instruments for heavy trucks and other vehicles as well as timing controls and cooking computers for the food
service industry. It supplies the aerospace industry with aircraft and engine sensors, monitoring systems, power instruments, data acquisition units, and fuel and fluid measurement systems.
EMG is a differentiated supplier of precision motion control solutions, thermal management systems, specialty metals and
electrical interconnects. It makes precision motion control products for data storage, medical devices, business equipment, automation and other applications. It manufacturers highly engineered electrical connectors and packaging used to protect
sensitive electronic devices. It provides high-purity metals, metal strip, shaped wire and advanced composites for a wide range of industrial applications. It operates a global network of aviation maintenance, repair and overhaul facilities. It
manufactures motors used in commercial appliances, fitness equipment, food and beverage machines, hydraulic pumps, industrial blowers and vacuum cleaners.
Measurement of Segment Results
Segment operating income
represents net sales less all direct costs and expenses (including certain administrative and other expenses) applicable to each segment, but does not include interest expense. Net sales by segment are reported after elimination of intra- and
intersegment sales and profits, which are insignificant in amount. Reported segment assets include allocations directly related to the segments operations. Corporate assets consist primarily of investments, prepaid pensions, insurance deposits
and deferred taxes.
87
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Reportable Segment Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(In thousands)
|
|
Net sales
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Instruments
|
|
$
|
2,360,285
|
|
|
$
|
2,417,192
|
|
|
$
|
2,421,638
|
|
Electromechanical
|
|
|
1,479,802
|
|
|
|
1,557,103
|
|
|
|
1,600,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net sales
|
|
$
|
3,840,087
|
|
|
$
|
3,974,295
|
|
|
$
|
4,021,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income and income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income
(2)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Instruments
|
|
$
|
577,717
|
|
|
$
|
639,399
|
|
|
$
|
612,992
|
|
Electromechanical
|
|
|
277,873
|
|
|
|
318,098
|
|
|
|
335,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating income
|
|
|
855,590
|
|
|
|
957,497
|
|
|
|
948,038
|
|
Corporate administrative and other expenses
|
|
|
(53,693
|
)
|
|
|
(49,781
|
)
|
|
|
(49,452
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating income
|
|
|
801,897
|
|
|
|
907,716
|
|
|
|
898,586
|
|
Interest and other expenses, net
|
|
|
(108,794
|
)
|
|
|
(101,336
|
)
|
|
|
(93,754
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated income before income taxes
|
|
$
|
693,103
|
|
|
$
|
806,380
|
|
|
$
|
804,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Instruments
|
|
$
|
4,104,972
|
|
|
$
|
3,827,182
|
|
|
|
|
|
Electromechanical
|
|
|
2,446,180
|
|
|
|
2,541,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets
|
|
|
6,551,152
|
|
|
|
6,368,435
|
|
|
|
|
|
Corporate
|
|
|
549,522
|
|
|
|
292,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated assets
|
|
$
|
7,100,674
|
|
|
$
|
6,660,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
(3)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Instruments
|
|
$
|
45,091
|
|
|
$
|
32,069
|
|
|
$
|
95,787
|
|
Electromechanical
|
|
|
39,340
|
|
|
|
88,369
|
|
|
|
35,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment additions to property, plant and equipment
|
|
|
84,431
|
|
|
|
120,438
|
|
|
|
131,191
|
|
Corporate
|
|
|
1,914
|
|
|
|
2,121
|
|
|
|
1,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated additions to property, plant and equipment
|
|
$
|
86,345
|
|
|
$
|
122,559
|
|
|
$
|
133,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Instruments
|
|
$
|
104,284
|
|
|
$
|
83,832
|
|
|
$
|
75,364
|
|
Electromechanical
|
|
|
73,767
|
|
|
|
64,539
|
|
|
|
61,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment depreciation and amortization
|
|
|
178,051
|
|
|
|
148,371
|
|
|
|
137,134
|
|
Corporate
|
|
|
1,665
|
|
|
|
1,089
|
|
|
|
1,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated depreciation and amortization
|
|
$
|
179,716
|
|
|
$
|
149,460
|
|
|
$
|
138,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
After elimination of intra- and intersegment sales, which are not significant in amount.
|
(2)
|
Segment operating income represents net sales less all direct costs and expenses (including certain administrative and other expenses) applicable to
each segment, but does not include interest expense.
|
(3)
|
Includes $23.1 million in 2016, $53.4 million in 2015 and $61.8 million in 2014 from acquired businesses.
|
88
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Geographic Areas
Information about the Companys operations in different geographic areas for the years ended December 31, 2016,
2015 and 2014 is shown below. Net sales were attributed to geographic areas based on the location of the customer. Accordingly, U.S. export sales are reported in international sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(In thousands)
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,829,341
|
|
|
$
|
1,919,611
|
|
|
$
|
1,825,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
|
|
188,700
|
|
|
|
201,192
|
|
|
|
220,877
|
|
European Union countries
|
|
|
619,138
|
|
|
|
615,956
|
|
|
|
674,608
|
|
Asia
|
|
|
785,868
|
|
|
|
789,435
|
|
|
|
806,926
|
|
Other foreign countries
|
|
|
417,040
|
|
|
|
448,101
|
|
|
|
493,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total international
|
|
|
2,010,746
|
|
|
|
2,054,684
|
|
|
|
2,196,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
$
|
3,840,087
|
|
|
$
|
3,974,295
|
|
|
$
|
4,021,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets from
continuing operations (excluding intangible assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
322,743
|
|
|
$
|
313,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
(2)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
|
|
59,208
|
|
|
|
68,396
|
|
|
|
|
|
European Union countries
|
|
|
58,368
|
|
|
|
66,635
|
|
|
|
|
|
Asia
|
|
|
12,204
|
|
|
|
13,928
|
|
|
|
|
|
Other foreign countries
|
|
|
20,707
|
|
|
|
21,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total international
|
|
|
150,487
|
|
|
|
170,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
$
|
473,230
|
|
|
$
|
484,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes U.S. export sales of $1,036.0 million in 2016, $1,090.7 million in 2015 and $1,148.1 million in 2014.
|
(2)
|
Represents long-lived assets of foreign-based operations only.
|
16.
|
Additional Consolidated Income Statement and Cash Flow Information
|
Included in other income are interest and other investment income of $1.2 million, $0.7 million and
$1.1 million for 2016, 2015 and 2014, respectively. Income taxes paid in 2016, 2015 and 2014 were $180.8 million, $157.8 million and $211.6 million, respectively. Cash paid for interest was $91.8 million, $90.8 million
and $74.9 million in 2016, 2015 and 2014, respectively.
89
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In 2015, the Company repurchased approximately 7,978,000 shares of its common stock for $435.4 million in cash under its share repurchase authorization. On both April 1 and November 4,
2015, the Companys Board of Directors approved an increase of $350 million in the authorization for the repurchase of Companys common stock. At December 31, 2015, $311.7 million was available under the Companys Board
of Directors authorization for future share repurchases. In 2016, the Company repurchased approximately 7,099,000 shares of its common stock for $336.1 million in cash under its share repurchase authorization. On November 2, 2016, the
Companys Board of Directors approved an increase of $400 million in the authorization for the repurchase of the Companys common stock. At December 31, 2016, $375.6 million was available under the Companys Board of
Directors authorization for future share repurchases.
At December 31, 2016, the Company held
32.1 million shares in its treasury at a cost of $1,211.5 million, compared with 25.2 million shares at a cost of $885.4 million at December 31, 2015. The number of shares outstanding at December 31, 2016 was
229.4 million shares, compared with 235.5 million shares at December 31, 2015.
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.
18.
|
2016 and 2015 Restructuring Charges
|
During the fourth quarter of 2016, the Company recorded pre-tax restructuring charges totaling $25.6 million, which
had the effect of reducing net income by $17.0 million ($0.07 per diluted share). The restructuring charges were reported in the consolidated statement of income as follows: $24.0 million in Cost of sales and $1.6 million in Selling,
general and administrative expenses. The restructuring charges were reported in segment operating income as follows: $12.4 million in EIG, $11.6 million in EMG and $1.6 million in corporate administrative expenses. The restructuring
actions primarily related to $19.3 million in severance costs for a reduction in workforce and $6.2 million of asset write-downs in response to the impact of a weak global economy on certain of the Companys businesses and the effects
of a continued strong U.S. dollar. The restructuring activities will be broadly implemented across the Companys various businesses through the end of 2017, with most actions expected to be completed in 2018.
During the fourth quarter of 2015, the Company recorded pre-tax restructuring charges totaling $20.7 million, which
had the effect of reducing net income by $13.9 million ($0.06 per diluted share). The restructuring charges were reported in the consolidated statement of income as follows: $20.0 million in Cost of sales and $0.7 million in Selling,
general and administrative expenses. The restructuring charges were reported in segment operating income as follows: $9.3 million in EIG, $10.8 million in EMG and $0.7 million in corporate administrative expenses. The restructuring
actions primarily related to a reduction in workforce in response to the impact of a weak global economy on certain of the Companys businesses and the effects of a continued strong U.S. dollar. The restructuring activities have been
broadly implemented across the Companys various businesses with all actions expected to be completed in the second half of 2017.
90
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the first quarter of 2015, the Company recorded pre-tax
restructuring charges totaling $15.9 million, which had the effect of reducing net income by $10.8 million ($0.04 per diluted share). The restructuring charges were reported in the consolidated statement of income as follows:
$15.8 million in Cost of sales and $0.1 million in Selling, general and administrative expenses. The restructuring charges were reported in segment operating income as follows: $9.3 million in EIG, $6.5 million in EMG and
$0.1 million in corporate administrative expenses. The restructuring actions primarily related to a reduction in workforce in response to the impact of a weak global economy on certain of the Companys businesses and the effects of a
continued strong U.S. dollar. The restructuring activities have been broadly implemented across the Companys various businesses with all actions completed in the second half of 2016.
Accrued liabilities in the Companys consolidated balance sheet included amounts related to the 2016 and 2015
restructuring charges as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
of
2016
Restructuring
|
|
|
Fourth Quarter
of
2015
Restructuring
|
|
|
First Quarter
of
2015
Restructuring
|
|
|
Total
|
|
Balance at December 31, 2014
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Pre-tax charges
|
|
|
|
|
|
|
20.7
|
|
|
|
15.9
|
|
|
|
36.6
|
|
Utilization
|
|
|
|
|
|
|
(1.4
|
)
|
|
|
(10.8
|
)
|
|
|
(12.2
|
)
|
Foreign currency translation adjustments and other
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
|
|
|
|
19.3
|
|
|
|
5.0
|
|
|
|
24.3
|
|
Pre-tax charges
|
|
|
25.6
|
|
|
|
|
|
|
|
|
|
|
|
25.6
|
|
Utilization
|
|
|
(6.4
|
)
|
|
|
(9.2
|
)
|
|
|
(3.4
|
)
|
|
|
(19.0
|
)
|
Foreign currency translation adjustments and other
|
|
|
|
|
|
|
(0.9
|
)
|
|
|
(0.1
|
)
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
19.2
|
|
|
$
|
9.2
|
|
|
$
|
1.5
|
|
|
$
|
29.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91
AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19.
|
Quarterly Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
Total Year
|
|
|
|
(In thousands, except per share amounts)
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
944,398
|
|
|
$
|
977,706
|
|
|
$
|
945,030
|
|
|
$
|
972,953
|
|
|
$
|
3,840,087
|
|
Operating income
(1)(2)
|
|
$
|
208,523
|
|
|
$
|
219,036
|
|
|
$
|
201,116
|
|
|
$
|
173,222
|
|
|
$
|
801,897
|
|
Net income
(1)(2)
|
|
$
|
134,170
|
|
|
$
|
138,193
|
|
|
$
|
130,687
|
|
|
$
|
109,108
|
|
|
$
|
512,158
|
|
Basic earnings per share
(1)(2)(3)
|
|
$
|
0.57
|
|
|
$
|
0.59
|
|
|
$
|
0.56
|
|
|
$
|
0.47
|
|
|
$
|
2.20
|
|
Diluted earnings per share
(1)(2)(3)
|
|
$
|
0.57
|
|
|
$
|
0.59
|
|
|
$
|
0.56
|
|
|
$
|
0.47
|
|
|
$
|
2.19
|
|
Dividends paid per share
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
984,059
|
|
|
$
|
1,003,726
|
|
|
$
|
998,527
|
|
|
$
|
987,983
|
|
|
$
|
3,974,295
|
|
Operating income
(4)
|
|
$
|
220,952
|
|
|
$
|
240,319
|
|
|
$
|
237,615
|
|
|
$
|
208,830
|
|
|
$
|
907,716
|
|
Net income
(4)
|
|
$
|
142,107
|
|
|
$
|
155,513
|
|
|
$
|
156,398
|
|
|
$
|
136,841
|
|
|
$
|
590,859
|
|
Basic earnings per share
(3)(4)
|
|
$
|
0.59
|
|
|
$
|
0.64
|
|
|
$
|
0.65
|
|
|
$
|
0.58
|
|
|
$
|
2.46
|
|
Diluted earnings per share
(3)(4)
|
|
$
|
0.59
|
|
|
$
|
0.64
|
|
|
$
|
0.65
|
|
|
$
|
0.57
|
|
|
$
|
2.45
|
|
Dividends paid per share
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
|
$
|
0.36
|
|
(1)
|
During 2016, the Company recorded pre-tax restructuring charges totaling $25.6 million, recorded in the fourth quarter of 2016. The
restructuring charges had the effect of reducing net income for 2016 by $17.0 million ($0.07 per diluted share). See Note 18.
|
(2)
|
During 2016, the Company recorded a $13.9 million non-cash impairment charge related to certain of the Companys trade names. The
impairment charge had the effect of reducing net income for 2016 by $8.6 million ($0.04 per diluted share). See Note 6.
|
(3)
|
The sum of quarterly earnings per share may not equal total year earnings per share due to rounding of earnings per share amounts, and differences
in weighted average shares and equivalent shares outstanding for each of the periods presented.
|
(4)
|
During 2015, the Company recorded pre-tax restructuring charges totaling $36.6 million, with $15.9 million recorded in the first quarter
of 2015 and $20.7 million recorded in the fourth quarter of 2015. The restructuring charges had the effect of reducing net income for 2015 by $24.7 million ($0.10 per diluted share), with $10.8 million net income reduction ($0.04 per
diluted share) in the first quarter of 2015 and $13.9 million net income reduction ($0.06 per diluted share) in the fourth quarter of 2015. See Note 18.
|
92