Page 18 - 2017 AMETEK Annual Report (Interactive) Updated mobile

Financial Review

Management’s Discussion and Analysis

This 2017 summary annual report contains abbreviated compared with international sales of $2,010.7 million or
financial information. The complete text of Management’s 52.4% of net sales in 2016. The $203.3 million increase in
Discussion and Analysis of Financial Condition and Results international sales was primarily driven by organic sales
of Operations and the consolidated financial statements growth. Both reportable segments of the Company maintain
and footnotes are presented in AMETEK’s 2017 Form 10-K strong international sales presences in Europe and Asia.
and in Appendix A to the Company’s Proxy Statement for
the 2018 Annual Meeting of Stockholders. Orders for 2017 were $4,539.8 million, an increase of
$691.0 million or 18.0%, compared with $3,848.8 million
Business Overview in 2016. The increase in orders for 2017 was due to 10%
AMETEK’s operations are affected by global, regional organic order growth, a 6% increase from acquisitions
and favorable 2% effect of foreign currency translation.
and industry economic factors. However, the Company’s As a result, the Company’s backlog of unfilled orders at
strategic geographic and industry diversification, and its December 31, 2017 was a record $1,396.1 million, an
mix of products and services, have helped to mitigate the increase of $239.6 million or 20.7%, compared with
potential adverse impact of any unfavorable developments $1,156.5 million at December 31, 2016.
in any one industry or the economy of any single country on
its consolidated operating results. The strengthening global The Company recorded 2017 realignment costs totaling
economic environment compared to 2016, contributions $16.8 million in the fourth quarter of 2017 (the “2017
from recent acquisitions, and continued focus on and realignment costs”). The 2017 realignment costs were
implementation of Operational Excellence initiatives, had composed of $3.0 million in severance costs for a
a positive impact on 2017 results. In 2017, the Company reduction in workforce, $7.8 million of asset write-downs
established records for orders, sales, operating income, net and $6.0 million in costs to withdraw from a multiemployer
income, diluted earnings per share and operating cash flow. defined benefit pension plan. The 2017 realignment costs
The continued strengthening global economic environment, better position the Company’s long-term cost structure and
contributions from recent acquisitions and continued focus included costs associated with the continued consolidation
on and implementation of Operational Excellence initiatives, of the Company’s floor care and specialty motors
including the 2017 and 2016 realignment actions (described businesses into its precision motion control businesses.
further throughout), are expected to have a positive impact The Company recorded 2016 realignment costs totaling
on the Company’s 2018 results. $25.6 million in the fourth quarter of 2016 (the “2016
realignment costs”). The 2016 realignment costs primarily
The table on the opposite page sets forth net sales related to $19.3 million in severance costs for a reduction in
and operating income for the Company by business workforce and $6.2 million of asset write-downs in response
segment and on a consolidated basis for the years ended to the impact of a weak global economy on certain of the
December 31, 2017, 2016 and 2015. The discussion that Company’s businesses, as well as the effects of a continued
follows should be read in conjunction with the condensed strong U.S. dollar. Also, in the fourth quarter of 2016, the
consolidated financial statements appearing elsewhere in Company recorded a $13.9 million noncash impairment
this summary annual report.
charge related to certain of the Company’s trade names.
Review of Operations The 2017 and 2016 realignment costs and 2016 impairment
Net sales for 2017 were $4,300.2 million, an increase charge were reported in the consolidated statement of
of $460.1 million or 12.0%, compared with net sales of income as follows (in millions):
Year Ended
$3,840.1 million in 2016. The increase in net sales for 2017 December 31,
was due to 6% organic sales growth and a 6% increase 2017 2016
from acquisitions. EIG net sales were $2,690.6 million in Realignment costs $ 16.8 $ 24.0
2017, an increase of 14.0%, compared with $2,360.3 million Impairment charge — 13.9
in 2016. The EIG net sales increase for 2017 was due to Cost of sales 16.8 37.9
a 9% increase from the 2017 acquisitions of MOCON and
Rauland and 2016 acquisitions of Nu Instruments, Brookfield Realignment costs — 1.6
and ESP/SurgeX, and 5% organic sales growth. EMG net Impairment charge — —
sales were $1,609.6 million in 2017, an increase of 9%, Selling, general and administrative expenses — 1.6
compared with $1,479.8 million in 2016. The EMG net sales
increase for 2017 was due to 8% organic sales growth and a Realignment costs 16.8 25.6
1% increase from the 2016 acquisition of Laserage. Impairment charge — 13.9
Total reported in the consolidated statement of income $ 16.8 $ 39.5
Total international sales for 2017 were $2,214.0 million or
51.5% of net sales, an increase of $203.3 million or 10.1%,
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