AMETEK INC/ - Quarter Report: 2019 September (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number

1-12981

AMETEK, Inc.

(Exact name of registrant as specified in its charter)


Delaware		14-1682544
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1100 Cassatt Road Berwyn, Pennsylvania		19312-1177
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:

(610) 647-2121

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	AME	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes

☐

☒

The number of shares of the registrant’s common stock outstanding as of the latest practicable date was: Common Stock, $0.01 Par Value, outstanding at October

, 2019 was 228,592,872 shares.

AMETEK, Inc.

Form

10-Q

Table of Contents


	Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statement of Income for the three and nine months ended September 30, 2019 and 2018		2
Condensed Consolidated Statement of Comprehensive Income for the three and nine months ended September 30, 2019 and 2018		3
Consolidated Balance Sheet at September 30, 2019 and December 31, 2018		4
Consolidated Statement of Stockholders’ Equity for the three and nine months ended September 30, 2019 and 2018		5
Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2019 and 2018		6
Notes to Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 4. Controls and Procedures		28

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		29

Item 6. Exhibits		30

SIGNATURES		31

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMETEK, Inc.

Consolidated Statement of Income

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Net sales	$	1,276,633		$	1,192,962		$	3,853,736		$	3,574,544

Cost of sales		823,262			782,994			2,512,722			2,351,042
Selling, general and administrative		152,315			144,702			461,289			429,982

Total operating expenses		975,577			927,696			2,974,011			2,781,024

Operating income		301,056			265,266			879,725			793,520
Interest expense		(21,308	)		(19,391	)		(65,436	)		(61,861	)
Other expense, net		(5,517	)		(945	)		(12,521	)		(2,684	)

Income before income taxes		274,231			244,930			801,768			728,975
Provision for income taxes		53,482			53,717			161,248			162,562

Net income	$	220,749		$	191,213		$	640,520		$	566,413

Basic earnings per share	$	0.97		$	0.83		$	2.82		$	2.45

Diluted earnings per share	$	0.96		$	0.82		$	2.79		$	2.43

Weighted average common shares outstanding:
Basic shares		228,041			231,502			227,493			231,227

Diluted shares		229,560			233,250			229,191			233,171

Dividends declared and paid per share	$	0.14		$	0.14		$	0.42		$	0.42

See accompanying notes.

AMETEK, Inc.

Condensed Consolidated Statement of Comprehensive Income

(In thousands)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Total comprehensive income	$	198,102	$	189,089	$	633,135	$	539,385

See accompanying notes.

AMETEK, Inc.

Consolidated Balance Sheet

(In thousands)


	September 30,			December 31,
	2019			2018
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	735,376		$	353,975
Receivables, net		761,961			732,839
Inventories, net		623,675			624,744
Other current assets		151,172			124,586

Total current assets		2,272,184			1,836,144
Property, plant and equipment, net		537,157			554,130
Right of use assets, net		174,438			—
Goodwill		3,668,445			3,612,033
Other intangibles, net		2,310,152			2,403,771
Investments and other assets		257,333			256,210

Total assets	$	9,219,709		$	8,662,288

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt, net	$	199,533		$	358,876
Accounts payable		381,945			399,571
Customer advanced payments		144,181			137,229
Income taxes payable		41,904			48,597
Accrued liabilities and other		342,956			314,431

Total current liabilities		1,110,519			1,258,704
Long-term debt, net		2,229,252			2,273,837
Deferred income taxes		549,178			528,336
Other long-term liabilities		464,795			359,489

Total liabilities		4,353,744			4,420,366

Stockholders’ equity:
Common stock		2,657			2,640
Capital in excess of par value		792,680			706,743
Retained earnings		6,198,836			5,653,811
Accumulated other comprehensive loss		(558,473	)		(551,088	)
Treasury stock		(1,569,735	)		(1,570,184	)

Total stockholders’ equity		4,865,965			4,241,922

Total liabilities and stockholders’ equity	$	9,219,709		$	8,662,288

See accompanying notes.

AMETEK, Inc.

Consolidated Statement of Stockholders’ Equity

(In thousands)

(Unaudited)


	Three months ended September 30,						Nine months ended September 30,
Capital stock	2019			2018			2019			2018
Preferred stock, $0.01 par value	$	—		$	—		$	—		$	—

Common stock, $0.01 par value
Balance at the beginning of the period		2,654			2,637			2,640			2,631
Shares issued		3			3			17			9

Balance at the end of the period		2,657			2,640			2,657			2,640

Capital in excess of par value
Balance at the beginning of the period		759,775			680,863			706,743			660,894
Issuance of common stock under employee stock plans		19,347			9,886			56,933			16,900
Share-based compensation expense		13,558			7,145			29,004			20,100

Balance at the end of the period		792,680			697,894			792,680			697,894

Retained earnings
Balance at the beginning of the period		6,009,968			5,315,232			5,653,811			5,002,419
Net income		220,749			191,213			640,520			566,413
Cash dividends paid		(31,883	)		(32,374	)		(95,498	)		(97,027	)
Other		2			(1	)		3			2,265

Balance at the end of the period		6,198,836			5,474,070			6,198,836			5,474,070

Accumulated other comprehensive (loss) income
Foreign currency translation:
Balance at the beginning of the period		(292,790	)		(281,175	)		(302,138	)		(251,909	)
Translation adjustments		(44,543	)		(7,771	)		(38,368	)		(48,303	)
Change in long-term intercompany notes		(11,292	)		(1,707	)		(12,312	)		(11,009	)
Net investment hedge instruments gain (loss), net of tax of ($9,736) and ($1,649) for the quarter ended September 30, 2019 and 2018 and ($11,086) and ($8,274) for the nine months ended September 30, 2019 and 2018, respectively		30,231			5,121			34,424			25,689

Balance at the end of the period		(318,394	)		(285,532	)		(318,394	)		(285,532	)

Defined benefit pension plans:
Balance at the beginning of the period		(243,036	)		(172,905	)		(248,950	)		(177,371	)
Amortization of net actuarial loss (gain) and other, net of tax of ($873) and ($719) for the quarter ended September 30, 2019 and 2018, and ($2,620) and ($2,157) for the nine months ended September 30, 2019 and 2018, respectively		2,957			2,233			8,871			6,699

Balance at the end of the period		(240,079	)		(170,672	)		(240,079	)		(170,672	)

Unrealized holding gain (loss) on available-for-sale securities:
Balance at the beginning of the period		—			—			—			104
Decrease during the year, net of tax		—			—			—			(104	)

Balance at the end of the period		—			—			—			—

Accumulated other comprehensive loss at the end of the period		(558,473	)		(456,204	)		(558,473	)		(456,204	)

Treasury stock
Balance at the beginning of the period		(1,569,790	)		(1,206,556	)		(1,570,184	)		(1,209,135	)
Issuance of common stock under employee stock plans		346			93			7,062			6,678
Purchase of treasury stock		(291	)		(28	)		(6,613	)		(4,034	)

Balance at the end of the period		(1,569,735	)		(1,206,491	)		(1,569,735	)		(1,206,491	)

Total stockholders’ equity	$	4,865,965		$	4,511,909		$	4,865,965		$	4,511,909

See accompanying notes.

AMETEK, Inc.

Condensed Consolidated Statement of Cash Flows

(In thousands)

(Unaudited)


	Nine Months Ended
	September 30,
	2019			2018
Cash provided by (used for):
Operating activities:
Net income	$	640,520		$	566,413
Adjustments to reconcile net income to total operating activities:
Depreciation and amortization		169,935			145,907
Deferred income taxes		13,397			(5,574	)
Share-based compensation expense		29,004			20,100
Gain on sale of facilities		(4,529	)		—
Net change in assets and liabilities, net of acquisitions		(82,604	)		(89,877	)
Pension contributions		(2,505	)		(2,194	)
Other, net		8,996			(5,420	)

Total operating activities		772,214			629,355

Investing activities:
Additions to property, plant and equipment		(61,525	)		(47,488	)
Purchases of businesses, net of cash acquired		(122,149	)		(376,248	)
Proceeds from sale of facilities		8,263			717
Other, net		2,059			(1,234	)

Total investing activities		(173,352	)		(424,253	)

Financing activities:
Net change in short-term borrowings		(258,211	)		921
Proceeds from long-term borrowings		100,000			—
Repayments of long-term borrowings		—			(240,000	)
Repurchases of common stock		(6,613	)		(4,034	)
Cash dividends paid		(95,498	)		(97,027	)
Proceeds from stock option exercises		59,645			28,661
Other, net		(7,249	)		(5,749	)

Total financing activities		(207,926	)		(317,228	)

Effect of exchange rate changes on cash and cash equivalents		(9,535	)		(15,453	)

Increase (decrease) in cash and cash equivalents		381,401			(127,579	)
Cash and cash equivalents:
Beginning of period		353,975			646,300

End of period	$	735,376		$	518,721

See accompanying notes.

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

1.	Basis of Presentation

The accompanying consolidated financial statements are unaudited. AMETEK, Inc. (the “Company”) believes that all adjustments (which primarily consist of normal recurring accruals) necessary for a fair presentation of the consolidated financial position of the Company at September 30, 2019, the consolidated results of its operations for the three and nine months ended September 30, 2019 and 2018 and its cash flows for the nine months ended September 30, 2019 and 2018 have been included. Quarterly results of operations are not necessarily indicative of results for the full year. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes presented in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2018 as filed with the U.S. Securities and Exchange Commission.

As discussed below in Note 2, effective January 1, 2019, the Company adopted the requirements of Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No.

2016-02

(Topic 842),

Leases

(“ASU

2016-02”)

using the effective date transition method. Amounts and disclosures set forth in this Form

10-Q

reflect this change.

2.	Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No.

2016-02

Leases (ASC 842). In July 2018, the FASB issued ASU No.

2018-10,

“Codification Improvements to Topic 842, Leases” (ASU

2018-10),

which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No.

2018-11,

“Leases (Topic 842)—Targeted Improvements” (ASU

2018-11),

which addressed implementation issues related to the new lease standard. These and certain other lease-related ASUs have generally been codified in ASC 842. ASC 842 supersedes the lease accounting requirements in Accounting Standards Codification Topic 840, Leases (ASC 840). ASC 842 establishes a

right-of-use

model that requires a lessee to record a

right-of-use

(“ROU”) asset and a lease liability on the balance sheet for all leases. Under ASC 842, leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The standard also requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. The Company adopted ASC 842 on January 1, 2019 using the effective date transition method. Prior period results continue to be presented under ASC 840 based on the accounting standards originally in effect for such periods.

The Company has elected certain practical expedients permitted under the transition guidance within ASC 842 to leases that commenced before January 1, 2019, including the package of practical expedients. The election of the package of practical expedients resulted in the Company not reassessing prior conclusions under ASC 840 related to lease identification, lease classification and initial direct costs for expired and existing leases prior to January 1, 2019. The Company did not elect the practical expedient to not record short-term leases on its consolidated balance sheet. The adoption of ASU

2016-02

did not have a significant impact on the Company’s consolidated results of operations or cash flows. Upon adoption, the Company recognized a ROU asset and lease liability of $192.4 million and $198.6 million, respectively. See Note 8.

In February 2018, the FASB issued ASU No.

2018-02,

Income Statement – Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

(“ASU

2018-02”).

ASU

2018-02

addresses a specific consequence of the Tax Act by allowing an election to reclassify from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Act’s reduction of the U.S federal corporate income tax rate. ASU

2018-02

is effective for all entities for annual reporting periods beginning after December 15, 2018, with early adoption permitted, and is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal income tax rate in the Tax Act is recognized. The Company adopted ASU

2018-02

on January 1, 2019, and upon adoption, the Company did not elect to reclassify the stranded income tax effects of the Tax Act from accumulated other comprehensive income to retained earnings.

In August 2018, the FASB issued ASU No.

2018-13,

Fair Value Measurement

(“ASU

2018-13”),

which changes the fair value measurement disclosure requirements of ASC Topic 820,

Fair Value Measurement

(“ASC 820”), by eliminating, modifying and adding to those requirements. ASU

2018-13

also modifies the disclosure objective paragraphs of ASC 820 to

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

eliminate (1) “at a minimum” from the phrase “an entity shall disclose at a minimum” and (2) other similar “open ended” disclosure requirements to promote the appropriate exercise of discretion by entities. ASU

2018-13

is effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted. The Company has not determined the impact ASU

2018-13

may have on the Company’s consolidated financial statement disclosures.

In August 2018, the FASB issued ASU No.

2018-14,

Compensation – Retirement Benefits – Defined Benefit Plans – General

(“ASU

2018-14”),

which changes the disclosure requirements of ASC Topic 715,

Compensation – Retirement Benefits

, by eliminating, modifying and adding to certain of those requirements. ASU

2018-14

is effective for fiscal years beginning after December 15, 2020. Early adoption is permitted and the amendments in this ASU should be applied on a retrospective basis to all periods presented. The Company has not determined the impact ASU

2018-14

may have on the Company’s consolidated financial statement disclosures.

In August 2018, the FASB issued ASU No.

2018-15,

Intangibles – Goodwill and Other –Internal-Use Software

(“ASU

2018-15”),

that requires implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs would be capitalized by the customer in a software licensing arrangement under the

internal-use

software guidance in ASC Topic 350,

Intangibles – Goodwill and Other

. ASU

2018-15

requires a customer to disclose the nature of its hosting arrangements that are service contracts and provide disclosures as if the deferred implementation costs were a separate, major depreciable asset class. ASU

2018-15

is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. The Company has not determined the impact ASU

2018-15

may have on the Company’s consolidated results of operations, financial position, cash flows and financial statement disclosures.

Revenues

The Company adopted ASC 606 as of January 1, 2018 using the modified retrospective method. The cumulative adjustment made to the January 1, 2018 consolidated balance sheet for the adoption of ASC 606 was to increase Retained earnings by $4.2 million, increase Total assets by $7.9 million and increase Total liabilities by $3.7 million.

The outstanding contract asset and liability accounts were as follows:


	2019			2018
	(In thousands)
Contract assets - January 1	$	58,266		$	32,658
Contract assets – September 30		78,010			60,037

Change in contract assets – increase		19,744			27,379

Contract liabilities – January 1		146,162			117,058
Contract liabilities – September 30		152,897			145,247

Change in contract liabilities – increase		(6,735	)		(28,189	)

Net change	$	13,009		$	(810	)

The net change for the nine months ended September 30, 2019 was primarily driven by the recognition of revenue as performance obligations were satisfied prior to billing and exceeded receipt of advance payments from customers. For the nine months ended September 30, 2019 and 2018, the Company recognized revenue

of $123.6 million and $95.0 million, respectively, that was previously included in the beginning balance of contract liabilities.

Contract assets are reported as a component of Other current assets in the consolidated balance sheet. At September 30, 2019 and December 31, 2018, $8.7 million and $8.9 million of Customer advanced payments (contract liabilities), respectively, were recorded in Other long-term liabilities in the consolidated balance sheets.

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

Applying the practical expedient available under ASC 606, the remaining performance obligations exceeding one year as of September 30, 2019 and December 31, 2018 were $196.6 million and $187.2 million, respectively. Remaining performance obligations represent the transaction price of firm, noncancelable orders, with expected delivery dates to customers greater than one year from the balance sheet date, for which the performance obligation is unsatisfied or partially unsatisfied. These performance obligations will be substantially satisfied within two to three years.

Geographic Areas

Information about the Company’s operations in different geographic areas is shown below. Net sales were attributed to geographic areas based on the location of the customer.


	Three Months Ended						Nine Months Ended
	September 30, 2019						September 30, 2019
	EIG		EMG		Total		EIG		EMG		Total
	(In thousands)
United States	$	421,629	$	252,343	$	673,972	$	1,250,564	$	764,001	$	2,014,565

International (1):
United Kingdom		19,538		34,319		53,857		47,885		100,657		148,542
European Union countries		99,180		98,357		197,537		302,800		308,138		610,938
Asia		190,419		46,347		236,766		569,553		142,035		711,588
Other foreign countries		84,786		29,715		114,501		271,908		96,195		368,103

Total international		393,923		208,738		602,661		1,192,146		647,025		1,839,171

Consolidated net sales	$	815,552	$	461,081	$	1,276,633	$	2,442,710	$	1,411,026	$	3,853,736

(1)	Includes U.S. export sales of $317.6 million and $965.1 million for the three months ended and the nine months ended, respectively.

Information about the Company’s operations in different geographic areas is shown below. Net sales were attributed to geographic areas based on the location of the customer.


	Three Months Ended						Nine Months Ended
	September 30, 2018						September 30, 2018
	EIG		EMG		Total		EIG		EMG		Total
	(In thousands)
United States	$	358,335	$	237,831	$	596,166	$	1,044,971	$	710,630	$	1,755,601

International (1):
United Kingdom		17,646		33,364		51,010		46,974		101,913		148,887
European Union countries		93,248		97,595		190,843		281,328		303,994		585,322
Asia		193,986		51,136		245,122		576,640		157,634		734,274
Other foreign countries		78,826		30,995		109,821		253,012		97,448		350,460

Total international		383,706		213,090		596,796		1,157,954		660,989		1,818,943

Consolidated net sales	$	742,041	$	450,921	$	1,192,962	$	2,202,925	$	1,371,619	$	3,574,544

(1)	Includes U.S. export sales of $308.4 million and $944.0 million for the three months ended and the nine months ended, respectively.

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

Major Products and Services

The Company’s major products and services in the reportable segments were as follows:


	Three Months Ended						Nine Months Ended
	September 30, 2019						September 30, 2019
	EIG		EMG		Total		EIG		EMG		Total
	(In thousands)
Process and analytical instrumentation	$	586,430	$	—	$	586,430	$	1,747,708	$	—	$	1,747,708
Aerospace and Power		229,122		123,228		352,350		695,002		362,498		1,057,500
Automation and engineered solutions		—		337,853		337,853		—		1,048,528		1,048,528

Consolidated net sales	$	815,552	$	461,081	$	1,276,633	$	2,442,710	$	1,411,026	$	3,853,736


	Three Months Ended						Nine Months Ended
	September 30, 2018						September 30, 2018
	EIG		EMG		Total		EIG		EMG		Total
	(In thousands)
Process and analytical instrumentation	$	514,513	$	—	$	514,513	$	1,530,004	$	—	$	1,530,004
Aerospace and Power		227,528		112,578		340,106		672,921		334,638		1,007,559
Automation and engineered solutions		—		338,343		338,343		—		1,036,981		1,036,981

Consolidated net sales	$	742,041	$	450,921	$	1,192,962	$	2,202,925	$	1,371,619	$	3,574,544

Timing of Revenue Recognition

The Company’s timing of revenue recognition was as follows:


	Three Months Ended						Nine Months Ended
	September 30, 2019						September 30, 2019
	EIG		EMG		Total		EIG		EMG		Total
	(In thousands)
Products transferred at a point in time	$	652,950	$	416,280	$	1,069,230	$	1,984,938	$	1,286,060	$	3,270,998
Products and services transferred over time		162,602		44,801		207,403		457,772		124,966		582,738

Consolidated net sales	$	815,552	$	461,081	$	1,276,633	$	2,442,710	$	1,411,026	$	3,853,736


	Three Months Ended						Nine Months Ended
	September 30, 2018						September 30, 2018
	EIG		EMG		Total		EIG		EMG		Total
	(In thousands)
Products transferred at a point in time	$	620,221	$	414,666	$	1,034,887	$	1,848,828	$	1,281,378	$	3,130,206
Products and services transferred over time		121,820		36,255		158,075		354,097		90,241		444,338

Consolidated net sales	$	742,041	$	450,921	$	1,192,962	$	2,202,925	$	1,371,619	$	3,574,544

Product Warranties

The Company provides limited warranties in connection with the sale of its products. The warranty periods for products sold vary among the Company’s operations, but the majority 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. Product warranty obligations are reported as a component of Accrued liabilities in the consolidated balance sheet.

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

Changes in the accrued product warranty obligation were as follows:


	Nine Months Ended
	September 30,
	2019			2018
	(In thousands)
Balance at the beginning of the period	$	23,482		$	22,872
Accruals for warranties issued during the period		14,342			8,166
Settlements made during the period		(13,335	)		(9,477	)
Warranty accruals related to acquired businesses and other during the period		617			1,261

Balance at the end of the period	$	25,106		$	22,822

4.	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). Securities that are anti-dilutive have been excluded and are not significant. The number of weighted average shares used in the calculation of basic earnings per share and diluted earnings per share was as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(In thousands)
Weighted average shares:
Basic shares		228,041		231,502		227,493		231,227
Equity-based compensation plans		1,519		1,748		1,698		1,944

Diluted shares		229,560		233,250		229,191		233,171

5.	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 Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

The following table provides the Company’s assets that are measured at fair value on a recurring basis, consistent with the fair value hierarchy, at September 30, 2019 and December 31, 2018:


	September 30, 2019		December 31, 2018
	Fair Value		Fair Value
	(In thousands)
Fixed-income investments	$	8,108	$	7,655

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 investments and other assets on the consolidated balance sheet.

For the nine months ended September 30, 2019 and 2018, gains and losses on the investments noted above were not significant. No transfers between level 1 and level 2 investments occurred during the nine months ended September 30, 2019 and 2018.

Financial Instruments

Cash, cash equivalents and fixed-income investments are recorded at fair value at September 30, 2019 and December 31, 2018 in the accompanying consolidated balance sheet.

The following table provides the estimated fair values of the Company’s financial instrument liabilities, for which fair value is measured for disclosure purposes only, compared to the recorded amounts at September 30, 2019 and December 31, 2018:


	September 30, 2019						December 31, 2018
	Recorded Amount			Fair Value			Recorded Amount			Fair Value
	(In thousands)
Long-term debt, net (including current portion)	$	(2,432,451	)	$	(2,612,882	)	$	(2,378,809	)	$	(2,368,676	)

The fair value of net

short-term

borrowings approximates the carrying value. Net short-term borrowings are valued as level 2 liabilities as they are corroborated by observable market data. The Company’s net long-term debt is all privately held with no public market for this debt, therefore, the fair value of net long-term debt was computed based on comparable current market data for similar debt instruments and is considered a level 3 liability.

Foreign Currency

At September 30, 2019, the Company had no forward contracts outstanding. For the nine months ended September 30, 2019 and 2018, realized gains and losses on foreign currency forward contracts were not significant. The Company does not typically designate its foreign currency forward contracts as hedges.

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

6.	Hedging Activities

The Company has designated certain foreign-currency-denominated long-term borrowings as hedges of the net investment in certain foreign operations. As of September 30, 2019, these net investment hedges included

British-pound-and

Euro-denominated long-term debt. These borrowings were designed to create net investment 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 management’s 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 hedged investment based on changes in the spot rate, which is used to measure hedge effectiveness.

At September 30, 2019, the Company had $375.2 million of British-pound-denominated loans, which were designated as a hedge against the net investment in British pound functional currency foreign subsidiaries. At September 30, 2019, the Company had $627.1 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 designated and 100% effective as net investment hedges, $45.5 million of

pre-tax

currency remeasurement gains have been included in the foreign currency translation component of other comprehensive income for the nine months ended September 30, 2019.

7.	Inventories, net


	September 30,		December 31,
	2019		2018
	(In thousands)
Finished goods and parts	$	101,242	$	107,289
Work in process		122,532		117,899
Raw materials and purchased parts		399,901		399,556

Total inventories, net	$	623,675	$	624,744

Leases

The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company has lease agreements which include lease and

non-lease

components, which the Company has elected to account for as a single lease component for all classes of underlying assets. Lease expense for variable lease components are recognized when the obligation is probable.

Operating leases are included in ROU assets, accrued liabilities and other, and other long-term liabilities on our consolidated balance sheets. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term. The Company has no material finance leases. The Company primarily leases buildings (real estate) and automobiles which are classified as operating leases. ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As an implicit interest rate is not readily determinable in our leases, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The lease term for all of the Company’s leases includes the

non-cancellable

period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Options for lease renewals have

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

been excluded from the lease term (and lease liability) for the majority of the Company’s leases as the reasonably certain threshold is not met. In a small number of the Company’s leases, the options for renewals have been included in the lease term as the reasonably certain threshold is met due to the Company having significant economic incentive for extending the lease.

Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on an index or rate and amounts probable to be payable under the exercise of the Company option to purchase the underlying asset if reasonably certain.

Variable lease payments not dependent on a rate or index associated with the Company’s leases are recognized when the events, activities, or circumstances in the lease agreement on which those payments are assessed are probable. Variable lease payments are presented as operating expense in the Company’s income statement in the same line item as expense arising from fixed lease payments.

The Company has commitments under operating leases for certain facilities, vehicles and equipment used in its operations. Our leases have initial lease terms ranging from one month to 14 years. Certain lease agreements contain provisions for future rent increases.

The components of lease expense were as follows:


	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
	(In thousands)		(In thousands)
Operating lease cost	$	10,500	$	29,209
Variable lease cost		543		3,073

Total lease cost	$	11,043	$	32,282

Supplemental balance sheet information related to leases was as follows:


	September 30, 2019
	(In thousands)
Right of use assets, net	$	174,438

Lease liabilities included in Accrued liabilities and other		40,822
Lease liabilities included in Other long-term liabilities		139,595

Total lease liabilities	$	180,417

Supplemental cash flow information and other information related to leases was as follows:


	Nine Months Ended
	September 30, 2019
	(In thousands)
Cash used in operations for operating leases	$	32,521
Right-of-use assets obtained in exchange for new operating liabilities	$	12,952
Weighted-average remaining lease terms - operating leases (years)		5.93
Weighted-average discount rate - operating leases		3.81	%

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

Maturities of lease liabilities as of September 30, 2019 were as follows:


Lease Liability Maturity Analysis	Operating Leases
Lease Liability Maturity Analysis	(In thousands)
Remaining 2019	$	12,293
2020		45,232
2021		37,712
2022		30,214
2023		24,335
Thereafter		52,890

Total lease payments		202,676
Less: imputed interest		22,259

	$	180,417

The Company does not have any leases that have not yet commenced which are significant.

9.	Acquisitions

The Company spent $122.1 million in cash, net of cash acquired, to acquire Pacific Design Technologies, Inc. (“PDT”) in September 2019. PDT designs and manufactures a complete range of custom-engineered, liquid cooling systems and components used in a broad set of current and next-generation commercial aerospace, defense and space platforms. PDT was privately held and is headquartered in Goleta, California. PDT is part of EMG.

The following table represents the preliminary allocation of the purchase price for the net assets of the PDT acquisition based on the estimated fair values at acquisition (in millions):


Property, plant and equipment	$	1.0
Goodwill		47.0
Other intangible assets		63.7
Net working capital and other (1)		10.4

Total cash paid	$	122.1

(1)	Includes $7.4 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 2019 acquisition as follows: PDT’s products and solutions enhance the Company’s position and broaden the Company’s differentiated product offerings in the aerospace and defense sectors.

At September 30, 2019, the purchase price allocated to other intangible assets of $63.7 million consists of $10.0 million of indefinite-lived intangible trade names, which are not subject to amortization. The remaining $53.7 million of other intangible assets consists of $43.7 million of customer relationships, which are being amortized over a period of 18 years, and $10.0 million of purchased technology, which is being amortized over a period of 18 years. Amortization expense for each of the next five years for the 2019 acquisition is expected to approximate $3 million per year.

The Company is in the process of finalizing the measurement of certain tangible and intangible assets and liabilities for its 2019 acquisition including inventory, property, plant and equipment, goodwill, trade names, customer relationships and purchased technology and the accounting for income taxes.

The Company finalized the measurement of its goodwill and other intangible assets related to its fourth quarter of 2018 acquisitions, which had no material impact to the consolidated statement of income. The

Company is in the process of finalizing the accounting for income taxes for its fourth quarter of 2018 acquisitions of Telular and Spectro Scientific.

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

The 2019 acquisition had an immaterial impact on reported net sales, net income and diluted earnings per share for the three and nine months ended September 30, 2019. Had the acquisition been made at the beginning of 2019 or 2018, unaudited pro forma net sales, net income and diluted earnings per share for the three and nine months ended September 30, 2019 and 2018, respectively, would not have been materially different than the amounts reported.

Acquisition subsequent to September 30, 2019

In October 2019, the Company acquired Gatan from Roper Technologies, Inc. for approximately $925 million in cash. Gatan has annual sales of approximately $180 million. Gatan is a leading manufacturer of instrumentation and software used to enhance and extend the operation and performance of electron microscopes. Gatan will join EIG.

10.

Goodwill

The changes in the carrying amounts of goodwill by segment were as follows:


	EIG			EMG			Total
	(In millions)
Balance at December 31, 2018	$	2,452.0		$	1,160.0		$	3,612.0
Goodwill acquired		—			47.0			47.0
Purchase price allocation adjustments and other		34.9			(0.3	)		34.6
Foreign currency translation adjustments		(11.5	)		(13.7	)		(25.2	)

Balance at September 30, 2019	$	2,475.4		$	1,193.0		$	3,668.4

11.	Income Taxes

At September 30, 2019, the Company had gross unrecognized tax benefits of $104.8 million, of which $63.1 million, if recognized, would impact the effective tax rate.

The following is a reconciliation of the liability for uncertain tax positions (in millions):


Balance at December 31, 2018	$	119.3
Additions for tax positions		13.3
Reductions for tax positions		(27.8	)

Balance at September 30, 2019	$	104.8

The Company recognizes interest and penalties accrued related to uncertain tax positions in income tax expense. The amounts recognized in income tax expense for interest and penalties during the three and nine months ended September 30, 2019 and 2018 were not significant.

The effective tax rate for the three months ended September 30, 2019 was 19.5%, compared with 21.9% for the three months ended September 30, 2018. The effective tax rate for the nine months ended September 30, 2019 was 20.1%, compared with 22.3% for the nine months ended September 30, 2018. Both comparative quarters effective tax rates include the impact of the 2017 U.S. Tax Cuts and Jobs Act (the “Act”) including the reduction of the U.S. corporate income tax rate and the current impact of the global intangible

low-taxed

income (“GILTI”) and the foreign-derived intangible income (“FDII”) provisions. The lower rates for 2019 reflects higher year over year tax benefits related to share-based payment transactions as well as the release of uncertain tax position liabilities primarily relating to statute expirations for U.S. Federal and State jurisdictions totaling $21.9 million.

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

12.

Debt

In December 2018, the Company completed a private placement agreement to sell $575 million and 75 million Euros in senior notes to a group of institutional investors (the “2018 Private Placement”). There were two funding dates under the 2018 Private Placement. The first funding occurred in December 2018 for $475 million and 75 million Euros ($85.1 million). The second funding occurred in January 2019 for $100 million. The 2018 Private Placement senior notes carry a weighted average interest rate of 3.93% 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 2018 Private Placement were used to pay down domestic borrowings under the Company’s revolving credit facility.

13.	Share-Based Compensation

Under the terms of the Company’s stockholder-approved share-based plans, performance restricted stock units (“PRSUs”), incentive and

non-qualified

stock options and restricted stock have been, and may be, issued to the Company’s officers, management-level employees and members of its Board of Directors. Stock options granted prior to 2018 generally vest at a rate of

one-fourth

on each of the first four anniversaries of the grant date and have a maximum contractual term of seven years. Beginning in 2018, stock options granted generally vest at a rate of

one-third

on each of the first three anniversaries of the grant date and have a maximum contractual term of ten years. Restricted stock granted to employees prior to 2018 generally vests

four years

after the grant date (cliff vesting) and is subject to accelerated vesting due to certain events, including doubling of the grant price of the Company’s common stock as of the close of business during any five consecutive trading days. Beginning in 2018, restricted stock granted to employees generally vests

one-third

on each of the first three anniversaries of the grant date

Restricted stock granted to non-employee directors generally vests

two years

In March 2019, the Company granted PRSUs to officers and certain key management-level employees an aggregate target award of approximately 102,000 shares of its common stock. The

PRSUs vest over a period up to three years from the grant date based on continuous service, with the number of shares

earned

(

0% to 200% of the target award) depending upon the extent to which the Company achieves certain financial and market performance targets measured over the period from January 1, 2019 through December 31, 2021. Half of the PRSUs were valued in a manner similar to restricted stock as the financial targets are based on the Company’s operating results, which represents a performance condition. The grant date fair value of these PRSUs are recognized as compensation expense over the vesting period based on the probable number of awards to vest at each reporting date. The other half of the PRSUs were valued using a Monte Carlo model as the performance target is related to the Company’s total shareholder return compared to a group of peer companies, which represents a market condition. The Company recognizes the grant date fair value of these awards as compensation expense ratably over the vesting period.

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

Total share-based compensation expense was as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(In thousands)
Stock option expense	$	3,214	$	2,924	$	9,594	$	8,467
Restricted stock expense		3,995		3,738		11,112		10,586
PRSU expense		6,349		483		8,298		1,047

Total pre-tax expense	$	13,558	$	7,145	$	29,004	$	20,100

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 recipient’s cash compensation is reported.

The fair value of each stock option grant is estimated on the grant date 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 periods indicated:


	Nine Months Ended			Year Ended
	September 30, 2019			December 31, 2018
Expected volatility		19.1	%		17.3	%
Expected term (years)		5.0			5.0
Risk-free interest rate		2.25	%		2.81	%
Expected dividend yield		0.66	%		0.76	%
Black-Scholes-Merton fair value per stock option granted	$	16.85		$	14.12

Expected volatility is based on the historical volatility of the Company’s stock over the stock options’ expected term. 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. The expected dividend yield is calculated by dividing the Company’s annual dividend, based on the most recent quarterly dividend rate, by the Company’s closing common stock price on the grant date. Compensation expense recognized for all share-based awards is net of estimated forfeitures. The Company’s estimated forfeiture rates are based on its historical experience.

The following is a summary of the Company’s stock option activity and related information:


	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
	(In thousands)					(Years)		(In millions)
Outstanding at December 31, 2018		5,629		$	53.46
Granted		826			85.43
Exercised		(1,389	)		42.95
Forfeited		(188	)		66.81

Outstanding at September 30, 2019		4,878		$	61.35		5.1	$	148.7

Exercisable at September 30, 2019		2,781		$	53.75		3.4	$	105.9

The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2019 was $59.7 million. The total fair value of stock options vested during the nine months ended September 30, 2019 was $11.7 million. As of September 30, 2019, there was approximately $22.3 million of expected future

pre-tax

compensation expense related to the 2.1 million nonvested stock options outstanding, which is expected to be recognized over a weighted average period of approximately

two years

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

The fair value of restricted shares under the Company’s restricted stock arrangement is determined by the product of the number of shares granted and the Company’s closing common stock price on the grant date. Upon the grant of restricted stock, the fair value of the restricted shares (unearned compensation) at the grant date is charged as a reduction of capital in excess of par value in the Company’s 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.

The following is a summary of the Company’s nonvested restricted stock activity and related information:


	Shares			Weighted Average Grant Date Fair Value
	(In thousands)
Nonvested restricted stock outstanding at December 31, 2018		891		$	58.98
Granted		202			85.28
Vested		(285	)		57.67
Forfeited		(74	)		64.08

Nonvested restricted stock outstanding at September 30, 2019		734		$	66.22

The total fair value of restricted stock vested during the nine months ended September 30, 2019 was $16.5 million. As of September 30, 2019, there was approximately $29.4 million of expected future

pre-tax

compensation expense related to the 0.7 million nonvested restricted shares outstanding, which is expected to be recognized over a weighted average period of approximately

two years

14.	Retirement and Pension Plans

The components of net periodic pension benefit expense (income) were as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(In thousands)
Defined benefit plans:
Service cost	$	1,678		$	1,766		$	5,093		$	5,373
Interest cost		6,677			6,311			20,179			19,214
Expected return on plan assets		(13,061	)		(14,734	)		(39,272	)		(44,581	)
Amortization of net actuarial loss and other		3,902			2,952			11,838			8,856

Pension expense (income)		(804	)		(3,705	)		(2,162	)		(11,138	)

Other plans:
Defined contribution plans		7,614			6,877			24,876			22,220
Foreign plans and other		3,816			1,505			6,921			4,688

Total other plans		11,430			8,382			31,797			26,908

Total net pension expense	$	10,626		$	4,677		$	29,635		$	15,770

Net periodic benefit cost, other than the service cost component, is included in “Other expense, net” in the consolidated statement of income.

For the nine months ended September 30, 2019 and 2018, contributions to the Company’s defined benefit pension plans were $2.5 million and $2.2 million, respectively. The Company’s current estimate of 2019 contributions to its worldwide defined benefit pension plans is in line with the range disclosed in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2018.

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

15.	Contingencies

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 that it has good and valid defenses to each of these claims and intends to defend them vigorously.

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 September 30, 2019, 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 to satisfy the Company’s 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 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 Company’s 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 September 30, 2019 and December 31, 2018 were $28.5 million and $27.8 million, respectively, for both

non-owned

and owned sites. For the nine months ended September 30, 2019, the Company recorded $5.3 million in reserves. Additionally, the Company spent $4.3 million on environmental matters and the reserve decreased $0.3 million due to foreign currency translation for the nine months ended September 30, 2019. The Company’s reserves for environmental liabilities at September 30, 2019 and December 31, 2018 included reserves of $9.1 million and $9.6 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 September 30, 2019, the Company had $12.4 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 HCC’s former owners for approximately $19 million of additional costs.

AMETEK, Inc.

Notes to Consolidated Financial Statements

September 30, 2019

(Unaudited)

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 for the environmental matters described above, 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 Company’s 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.

The Company has been remediating groundwater contamination for several contaminants, including trichloroethylene (“TCE”), at a formerly owned site in El Cajon, California. Several lawsuits have been filed against the Company alleging damages resulting from the groundwater contamination, including property damages and personal injury, and seeking compensatory and punitive damages. The Company believes that it has good and valid defenses to each of these claims and intends to defend them vigorously. The Company believes it has established reserves for these lawsuits that are sufficient to satisfy its expected exposure. The Company does not expect the outcome of these matters, either individually or in the aggregate, to materially affect the consolidated results of operations, financial position or cash flows of the Company.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

The following table sets forth net sales and income by reportable segment and on a consolidated basis:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(In thousands)
Net sales:
Electronic Instruments	$	815,552		$	742,041		$	2,442,710		$	2,202,925
Electromechanical		461,081			450,921			1,411,026			1,371,619

Consolidated net sales	$	1,276,633		$	1,192,962		$	3,853,736		$	3,574,544

Operating income and income before income taxes:
Segment operating income:
Electronic Instruments	$	219,451		$	190,313		$	635,448		$	567,503
Electromechanical		103,451			92,667			303,329			277,919

Total segment operating income		322,902			282,980			938,777			845,422
Corporate administrative expenses		(21,846	)		(17,714	)		(59,052	)		(51,902	)

Consolidated operating income		301,056			265,266			879,725			793,520
Interest expense		(21,308	)		(19,391	)		(65,436	)		(61,861	)
Other expense, net		(5,517	)		(945	)		(12,521	)		(2,684	)

Consolidated income before income taxes	$	274,231		$	244,930		$	801,768		$	728,975

For the quarter ended September 30, 2019, the Company posted record operating income and operating cash flow, as well as strong sales, backlog, operating income margins, net income, and diluted earnings per share. The Company achieved these results from organic sales growth in both EIG and EMG, contributions from the 2019 acquisition of Pacific Design Technologies, Inc. (“PDT”) in September 2019, the 2018 acquisitions of Spectro Scientific Corporation in November 2018, Forza Silicon Corporation (“Forza”) and Telular Corporation in October 2018, as well as our Operational Excellence initiatives.

For 2019, the Company’s strong backlog, the full year impact of the 2018 and 2019 acquisitions and continued focus on and implementation of Operational Excellence initiatives are expected to have a positive impact on the remainder of the Company’s 2019 results.

Results of operations for the third quarter of 2019 compared with the third quarter of 2018

Net sales for the third quarter of 2019 were $1,276.6 million, an increase of $83.6 million or 7.0%, compared with net sales of $1,193.0 million for the third quarter of 2018. The increase in net sales for the third quarter of 2019 was due to 3% organic sales growth and a 5% increase from acquisitions, partially offset by an unfavorable 1% effect of foreign currency translation.

Total international sales for the third quarter of 2019 were $602.7 million or 47.2% of net sales, an increase of $5.9 million or 1.0%, compared with international sales of $596.8 million or 50.0% of net sales for the third quarter of 2018. The $5.9 million increase in international sales was primarily driven from recent acquisitions. Both reportable segments of the Company maintain strong international sales presences in Europe and Asia.

Orders for the third quarter of 2019 were $1,227.7 million, an increase of $35.7 million or 3.0%, compared with $1,192.0 million for the third quarter of 2018. The increase in orders for the third quarter of 2019 was due to an 8% increase from acquisitions partially offset by a 3% decrease in organic growth and an unfavorable 2% effect of foreign currency translation.

Segment operating income for the third quarter of 2019 was $322.9 million, an increase of $39.9 million or 14.1%, compared with segment operating income of $283.0 million for the third quarter of 2018. Segment operating income, as a percentage of net sales, increased to 25.3% for the third quarter of 2019, compared with 23.7% for the third quarter of 2018.

The increase in segment operating income and segment operating margins for the third quarter of 2019 resulted primarily from the increase in net sales noted above, as well as the benefits of the Company’s Operational Excellence initiatives.

Cost of sales for the third quarter of 2019 was $823.3 million or 64.5% of net sales, an increase of $40.3 million or 5.1%, compared with $783.0 million or 65.6% of net sales for the third quarter of 2018.

Selling, general and administrative expenses for the third quarter of 2019 were $152.3 million or 11.9% of net sales, an increase of $7.6 million or 5.3%, compared with $144.7 million or 12.1% of net sales for the third quarter of 2018. Selling, general and administrative expenses increased primarily due to the increase in net sales noted above.

Consolidated operating income was a record $301.1 million or 23.6% of net sales for the third quarter of 2019, an increase of $35.8 million or 13.5%, compared with $265.3 million or 22.2% of net sales for the third quarter of 2018.

Interest expense was $21.3 million for the third quarter of 2019, an increase of $1.9 million or 9.9%, compared with $19.4 million for the third quarter of 2018. The change in interest expense is largely driven by the 2018 private placement senior notes issued in December 2018 ($475 million and 75 million Euros) and January 2019 ($100 million), partially offset by a decrease related to the repayment in full, at maturity, of $80 million in aggregate principal amount of 6.35% private placement senior notes and $160 million in aggregate principal amount of 7.08% private placement senior notes in the third quarter of 2018, and $65 million in aggregate principal amount of 7.18% private placement senior notes in the fourth quarter of 2018.

Other expense, net was $5.5 million for the third quarter of 2019, an increase of $4.6 million, compared with $0.9 million for the third quarter of 2018. The Other expense, net increase for 2019 was primarily due to lower defined benefit pension income, compared to the same period in 2018.

The effective tax rate for the third quarter of 2019 was 19.5%, compared with 21.9% for the third quarter of 2018. The 2019 and 2018 effective tax rates reflect the release of uncertain tax position liabilities primarily relating to statute expirations for U.S. Federal and State jurisdictions totaling $21.9 million and $11.4 million, respectively. See Note 11 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form

10-Q.

Net income for the third quarter of 2019 was $220.7 million, an increase of $29.5 million or 15.4%, compared with $191.2 million for the third quarter of 2018.

Diluted earnings per share for the third quarter of 2019 were $0.96, an increase of $0.14 or 17.1%, compared with $0.82 per diluted share for the third quarter of 2018.

Segment Results

EIG’s

net

sales totaled $815.6 million for the third quarter of 2019, an increase of $73.5 million or 9.9%, compared with $742.0 million for the third quarter of 2018. The net sales increase was due to a 7% increase from acquisitions and 3% organic sales growth, partially offset by an unfavorable 1% effect of foreign currency translation.

EIG’s operating income was a record $219.5 million for the third quarter of 2019, an increase of $29.1 million or 15.3%, compared with $190.3 million for the third quarter of 2018. EIG’s operating margins were 26.9% of net sales for the third quarter of 2019, compared with 25.6% for the third quarter of 2018. The increase in EIG’s operating income and operating margins for the third quarter of 2019 were primarily due to the increase in net sales noted above, as well as the benefits of the Group’s Operational Excellence initiatives.

EMG’s

net sales totaled $461.1 million for the third quarter of 2019, an increase of $10.2 million or 2.3%, compared with $450.9 million for the third quarter of 2018. The net sales increase was due to 3% organic sales growth, partially offset by an unfavorable 1% effect of foreign currency translation.

EMG’s operating income was a record at $103.5 million for the third quarter of 2019, an increase of $10.8 million or 11.6%, compared with $92.7 million for the third quarter of 2018. EMG’s operating margins were 22.4% of net sales for the third quarter of 2019, compared with 20.6% for the third quarter of 2018. The increase in EMG’s operating income and operating margins for the first quarter of 2019 were primarily due to the increase in net sales noted above, as well as the benefits of the Group’s Operational Excellence initiatives.

Results of operations for the first nine months of 2019 compared with the first nine months of 2018

Net sales for the first nine months of 2019 were $3,853.7 million, an increase of $279.2 million or 7.8%, compared with net sales of $3,574.5 million for the first nine months of 2018. The increase in net sales for the first nine months of 2019 was due to 4% organic sales growth, a 5% increase from acquisitions and an unfavorable 1% effect of foreign currency translation.

Total international sales for the first nine months of 2019 were $1,839.2 million or 47.7% of net sales, an increase of $20.2 million or 1.1%, compared with international sales of $1,818.9 million or 50.9% of net sales for the first nine months of 2018. The increase in international sales was primarily driven by recent acquisitions. Both reportable segments of the Company maintain strong international sales presences in Europe and Asia.

Orders for the first nine months of 2019 were $3,884.0 million, an increase of $116.3 million or 3.1%, compared with $3,767.7 million for the first nine months of 2018. The increase in orders for the first nine months of 2019 was due to a 4% increase from acquisitions, partially offset by an unfavorable 1% effect of foreign currency translation. As a result, the Company’s backlog of unfilled orders at September 30, 2019 was $1,632.3 million, an increase of $30.2 million or 1.9%, compared with $1,602.1 million at December 31, 2018.

Segment operating income for the first nine months of 2019 was $938.8 million, an increase of $93.4 million or 11.0%, compared with segment operating income of $845.4 million for the first nine months of 2018. Segment operating income, as a percentage of net sales, increased to 24.4% for the first nine months of 2019, compared with 23.7% for the first nine months of 2018. The increase in segment operating income and segment operating margins for the first nine months of 2019 resulted primarily from the increase in net sales noted above, as well as the benefits of the Company’s Operational Excellence initiatives.

Cost of sales for the first nine months of 2019 was $2,512.7 million or 65.2% of net sales, an increase of $161.7 million or 6.9%, compared with $2,351.0 million or 65.8% of net sales for the first nine months of 2018. Cost of sales increased primarily due to the increase in net sales noted above.

Selling, general and administrative expenses for the first nine months of 2019 were $461.3 million or 12.0% of net sales, an increase of $31.3 million or 7.3%, compared with $430.0 million or 12.0% of net sales for the first nine months of 2018. Selling, general and administrative expenses increased primarily due to the increase in net sales noted above.

Consolidated operating income was $879.7 million or 22.8% of net sales for the first nine months of 2019, an increase of $86.2 million or 10.9%, compared with $793.5 million or 22.2% of net sales for the first nine months of 2018.

Interest expense was $65.4 million for the first nine months of 2019, an increase of $3.6 million or 5.8%, compared with $61.9 million for the first nine months of 2018. The change in interest expense is largely driven by the 2018 private placement senior notes issued in December 2018 ($475 million and 75 million Euros) and January 2019 ($100 million), partially offset by a decrease related to the repayment in full, at maturity, of $80 million in aggregate principal amount of 6.35% private placement senior notes and $160 million in aggregate principal amount of 7.08% private placement senior notes in the third quarter of 2018, and $65 million in aggregate principal amount of 7.18% private placement senior notes in the fourth quarter of 2018.

Other expense, net was $12.5 million for the first nine months of 2019, an increase of $9.8 million compared with $2.7 million for the first nine months of 2018. The Other expense, net increase for 2019 was primarily due to lower defined benefit pension income, compared to the same period in 2018.

The effective tax rate for the first nine months of 2019 was 20.1%, compared with 22.3% for the first nine months of 2018. The lower rate for 2019 mainly reflects higher year over year tax benefits related to share-based payment transactions as well as lower tax cost on foreign source income. The third quarter of 2019 and 2018 effective tax rates also reflect the release of uncertain tax position liabilities primarily relating to statute expirations for U.S. Federal and State jurisdictions totaling $21.9 and $11.4 million, respectively. See Note 11 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form

10-Q.

Net income for the first nine months of 2019 was $640.5 million, an increase of $74.1 million or 13.1%, compared with $566.4 million for the first nine months of 2018.

Diluted earnings per share for the first nine months of 2019 were $2.79, an increase of $0.36 or 14.8%, compared with $2.43 per diluted share for the first nine months of 2018.

Segment Results

EIG’s

net

sales totaled $2,442.7 million for the first nine months of 2019, an increase of $239.8 million or 10.9%, compared with $2,202.9 million for the first nine months of 2018. The net sales increase was due to 3% organic sales growth, a 9% increase from the 2018 acquisitions of Motec, Spectro Scientific Corporation, Forza and Telular Corporation, partially offset by an unfavorable 1% effect of foreign currency translation.

EIG’s operating income was $635.4 million for the first nine months of 2019, an increase of $67.9 million or 12.0%, compared with $567.5 million for the first nine months of 2018. The increase in EIG’s operating income for the first nine months of 2019 was primarily due to the increase in net sales noted above. EIG’s operating margins were 26.0% of net sales for the first nine months of 2019, compared with 25.8% of net sales for the first nine months of 2018. EIG’s operating margins for the first nine months of 2019 increased slightly due to the benefits of the Group’s Operational Excellence initiatives, partially offset by a negative 1% impact of lower margins on recent acquisitions.

EMG’s

net sales totaled $1,411.0 million for the first nine months of 2019, an increase of $39.4 million or 2.9%, compared with $1,371.6 million for the first nine months of 2018. The net sales increase was due to 4% organic sales growth and a 2% unfavorable effect of foreign currency translation.

EMG’s operating income was $303.3 million for the first nine months of 2019, an increase of $25.4 million or 9.1%, compared with $277.9 million for the first nine months of 2018. EMG’s operating margins were 21.5% of net sales for the first nine months of 2019, compared with 20.3% of net sales for the first nine months of 2018. The increase in EMG’s operating income and operating margins for the first nine months of 2019 was primarily due to the increase in net sales noted above, as well as the benefits of the Group’s Operational Excellence initiatives.

Financial Condition

Liquidity and Capital Resources

Cash provided by operating activities totaled $772.2 million for the first nine months of 2019, an increase of $142.8 million or 22.7%, compared with $629.4 million for the first nine months of 2018. The increase in cash provided by operating activities for the first nine months of 2019 was primarily due to higher net income and better working capital management.

Free cash flow (cash flow provided by operating activities less capital expenditures) was $710.7 million for the first nine months of 2019, compared with $581.9 million for the first nine months of 2018. EBITDA (earnings before interest, income taxes, depreciation and amortization) was $1,034.5 million for the first nine months of 2019, compared with $935.5 million for the first nine months of 2018. Free cash flow and EBITDA are presented because the Company is aware that they are measures used by third parties in evaluating the Company.

Cash used for investing activities totaled $173.4 million for the first nine months of 2019, compared with $424.3 million for the first nine months of 2018. Additions to property, plant and equipment totaled $61.5 million for the first nine months of 2019, compared with $47.5 million for the first nine months of 2018. For the first nine months of 2019, the Company paid $122.1 million, net of cash acquired, to acquire PDT in September 2019. For the first nine months of 2018, the Company paid $376.2 million, net of cash acquired, to acquire Motec in June 2018, SoundCom in April 2018 and FMH in January 2018.

Cash used for financing activities totaled $207.9 million for the first nine months of 2019, compared with $317.2 million for the first nine months of 2018. At September 30, 2019, total debt, net was $2,428.8 million, compared with $2,632.7 million at December 31, 2018. For the first nine months of 2019, short-term borrowings decreased by $258.2 million, compared with a $0.9 million increase for the first nine months of 2018. At September 30, 2019, the Company had available borrowing capacity of $1,970.2 million under its revolving credit facility, including the $500 million accordion feature.

In December 2018, the Company completed the 2018 private placement agreement to sell $575 million and 75 million Euros in senior notes to a group of institutional investors utilizing two funding dates. The first funding occurred in December 2018 for $475 million and 75 million Euros ($85.1 million). The third funding occurred in January 2019 for $100 million. The 2018 Private Placement senior notes carry a weighted average interest rate of 3.93% 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 funding from the 2018 Private Placement were used to pay down domestic borrowings under the Company’s revolving credit facility.

In the third quarter of 2018, $80 million of 6.35% senior notes and $160 million of 7.08% senior notes matured and were paid. In the fourth quarter of 2018, $65 million of 7.18% senior notes matured and were paid. The

debt-to-capital

ratio was 33.3% at September 30, 2019, compared with 38.3% at December 31, 2018. The net

debt-to-capital

ratio (total debt, net less cash and cash equivalents divided by the sum of net debt and stockholders’ equity) was 25.8% at September 30, 2019, compared with 34.9% at December 31, 2018. The net

debt-to-capital

ratio is presented because the Company is aware that this measure is used by third parties in evaluating the Company.

Additional financing activities for the first nine months of 2019 included cash dividends paid of $95.5 million, compared with $97.0 million for the first nine months of 2018. Effective February 12, 2019, the Company’s Board of Directors approved an increase of $500 million in the authorization for the repurchase of the Company’s common stock. Proceeds from stock option exercises were $59.6 million for the first nine months of 2019, compared with $28.7 million for the first nine months of 2018.

As a result of all the Company’s cash flow activities for the first nine months of 2019, cash and cash equivalents at September 30, 2019 totaled $735.4 million, compared with $354.0 million at December 31, 2018. At September 30, 2019, the Company had $363.0 million in cash outside the United States, compared with $311.2 million at December 31, 2018. The Company utilizes this cash to fund its international operations, as well as to acquire international businesses. The Company is in compliance with all covenants, including financial covenants, for all of its debt agreements. The Company believes it has sufficient cash-generating capabilities from domestic and unrestricted foreign sources, available credit facilities and access to long-term capital funds to enable it to meet its operating needs and contractual obligations in the foreseeable future.

Critical Accounting Policies

The Company’s critical accounting policies are detailed in Part II, Item 7 Management’s Discussion and Analysis of Financial Condition of its Annual Report on Form

10-K

for the year ended December 31, 2018. Primary disclosure of the Company’s significant accounting policies is also included in Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of its Annual Report on Form

10-K.

Revenue Recognition.

The majority of the Company’s revenues on product sales are recognized at a point in time when the customer obtains control of the product. The transfer in control of the product to the customer is typically evidenced by one or more of the following: the customer having legal title to the product, the Company’s present right to payment, the customer’s physical possession of the product, the customer accepting the product, or the customer has the benefits of ownership or risk of loss. Legal title transfers to the customer in accordance with the delivery terms of the order, usually upon shipment, which is the point that control transfers. For a small percentage of sales where title and risk of loss transfers at the point of delivery, the Company recognizes revenue upon delivery to the customer, which is the point that control transfers, assuming all other criteria for revenue recognition are met.

Under ASC 606, the Company determined that revenues from certain of its customer contracts met the criteria of satisfying its performance obligations over time, primarily in the areas of the manufacture of custom-made equipment and for service repairs of customer-owned equipment. Prior to the adoption of the new standard, these revenues were recorded upon shipment or, in the case of those sales where title and risk of loss passes at the point of delivery, the Company recognized revenue upon delivery to the customer. Recognizing revenue over time for custom-manufactured equipment is based on the Company’s judgment that, in certain contracts, the product does not have an alternative use and the Company has an enforceable right to payment for performance completed to date. This change in revenue recognition accelerated the revenue recognition and costs on the impacted contracts.

Applying the practical expedient available under ASC 606, the Company recognizes incremental cost of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company would have otherwise recognized is one year or less. These costs are included in Selling, general and administrative expenses in the consolidated statement of income.

Revenues associated with repairs of customer-owned assets were previously recorded upon completion and shipment of the repaired equipment to the customer. Under ASC 606, if the Company’s performance enhances an asset that the customer controls as the asset is enhanced, revenue must be recognized over time. The revenue associated with the repair of a customer-owned asset meets this criterion.

The determination of the revenue to be recognized in a given period for performance obligations satisfied over time is based on the input method. The Company recognizes revenue over time as it performs on these contracts because the transfer of control to the customer occurs over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The Company generally uses the total

cost-to-cost

input method of progress because it best depicts the transfer of control to the customer that occurs as costs are incurred. Under the

cost-to-cost

method, the extent of progress towards completion is measured based on the proportion of costs incurred to date to the total estimated costs at completion of the performance obligation. On certain contracts, labor hours is used as the measure of progress when it is determined to be a better depiction of the transfer of control to the customer due to the timing and pattern of labor hours incurred.

Performance obligations also include post-delivery service, installation and training. Post-delivery service revenues are recognized over the contract term. Installation and training revenues are recognized over the period the service is provided. Warranty terms in customer contracts can also be considered separate performance obligations if the warranty provides services beyond assurance that a product complies with agreed-upon specification or if a warranty can be purchased separately. The Company does not incur significant obligations for customer returns and refunds.

Payment terms generally begin upon shipment of the product. The Company does have contracts with multiple billing terms that are all due within one year from when the product is delivered. No significant financing component exists. Payment terms are generally

30-60

days from the time of shipment or customer acceptance, but terms can be shorter or longer. For customer contracts that have revenue recognized over time, revenue is generally recognized prior to a payment being due from the customer. In such cases, the Company recognizes a contract asset at the time the revenue is recognized. When payment becomes due based on the contract terms, the Company reduces the contract asset and records a receivable. In contracts with billing milestones or in other instances with a long production cycle or concerns about credit, customer advance payments are received. The Company may receive a payment in excess of revenue recognized to that date. In these circumstances, a contract liability is recorded.

The Company has certain contracts with variable consideration in the form of volume discounts, rebates and early payment options, which may affect the transaction price used as the basis for revenue recognition. In these contracts, the amount of the variable consideration is not considered constrained and is allocated among the various performance obligations in the customer contract based on the relative standalone selling price of each performance obligation to the total standalone value of all the performance obligations.

Forward-Looking Information

Information contained in this discussion, other than historical information, is considered “forward-looking statements” and is subject to various factors and uncertainties that may cause actual results to differ significantly from expectations. These factors and uncertainties include general economic conditions affecting the industries the Company serves; changes in the competitive environment or the effects of competition in the Company’s markets; risks associated with international sales and operations; the Company’s ability to consummate and successfully integrate future acquisitions; the Company’s ability to successfully develop new products, open new facilities or transfer product lines; the price and availability of raw materials; compliance with government regulations, including environmental regulations; and the ability to maintain adequate liquidity and financing sources. A detailed discussion of these and other factors that may affect the Company’s future results is contained in AMETEK’s filings with the U.S. Securities and Exchange Commission, including its most recent reports on Form

10-K,

10-Q

and

8-K.

AMETEK disclaims any intention or obligation to update or revise any forward-looking statements, unless required by the securities laws to do so.

Item 4. Controls and Procedures

The Company maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed, is accumulated and communicated to management in a timely manner. Under the supervision and with the participation of our management, including the Company’s principal executive officer and principal financial officer, we have evaluated the effectiveness of our system of disclosure controls and procedures as required by Exchange Act Rule

13a-15(b)

as of September 30, 2019. Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective at the reasonable assurance level.

Such evaluation did not identify any change in the Company’s internal control over financial reporting during the quarter ended September 30, 2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table reflects purchases of AMETEK, Inc. common stock by the Company during the three months ended September 30, 2019:


Period	Total Number of Shares Purchased (1)(2)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan (2)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan
July 1, 2019 to July 31, 2019		2,579	$	90.97		2,579	$	494,493,031
August 1, 2019 to August 31, 2019		653		86.26		653		494,436,704
September 1, 2019 to September 30, 2019		—		—		—		494,436,704

Total		3,232		90.02		3,232

(1)	Represents shares surrendered to the Company to satisfy tax withholding obligations in connection with employees’ share-based compensation awards.

(2)

Consists of the number of shares purchased pursuant to the Company’s Board of Directors $500 million authorization for the repurchase of its common stock announced in February 2019. Such purchases may be affected from time to time in the open market or in private transactions, subject to market conditions and at management’s discretion.

Item 6. Exhibits


Exhibit Number		Description

	10.1*	Form of Performance Restricted Stock Unit Agreement for Chief Executive Officer

	10.2*	Form of Performance Restricted Stock Unit Agreement for US Employees

	10.3*	Form of Performance Restricted Stock Unit Agreement for Non-US Employees

	31.1*	Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2*	Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1*	Certification of Chief Executive Officer, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32.2*	Certification of Chief Financial Officer, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	101.INS*	XBRL Instance Document.

	101.SCH*	XBRL Taxonomy Extension Schema Document.

	101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.

	101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.

	101.LAB*	XBRL Taxonomy Extension Label Linkbase Document.

	101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

	104	Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

*	Filed electronically herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


AMETEK, Inc.
(Registrant)

By:		/s/ Thomas M. Montgomery
		Thomas M. Montgomery
		Senior Vice President – Comptroller
		(Principal Accounting Officer)

November 1, 2019