Page 20 - 2017 AMETEK Annual Report (Interactive) Updated mobile

Interest expense was $98.0 million for 2017, an increase of of the Act and has not provided any provisional deferred tax
$3.7 million or 3.9%, compared with $94.3 million in 2016. liability for it. Under U.S. GAAP, the Company is permitted
The interest expense increase for 2017 was primarily due to make an accounting policy election to either treat taxes
to the impact of private placement senior notes funded in due on future inclusions in the U.S. taxable income related
the fourth quarter of 2016, partially offset by lower average to GILTI as a current-period expense when incurred or to
borrowings under the Company’s revolving credit facility factor such amounts into the Company’s measurement
period over period. of its deferred taxes. Due to the ongoing evaluation, the
Company has not yet made the accounting policy decision.
Other expenses, net were $20.3 million for 2017, an
increase of $5.8 million, compared with $14.5 million in The 2017 effective tax rate reflects $12.3 million of tax
2016. The other expenses, net increase for 2017 was benefits related to share-based payment transactions
primarily due to higher environmental-related expenses. in accordance with the January 1, 2017 adoption of
the Financial Accounting Standards Board Accounting
The effective tax rate for 2017 was 14.5%, compared with Standards Update No. 2016-09, Improvements to Employee
26.1% in 2016. On December 22, 2017, the U.S. enacted the Share-Based Payment Accounting.
Tax Cuts and Jobs Act (the “Act”). The Act, which is also
commonly referred to as “U.S. Tax Reform,” significantly The effective tax rates for 2017 and 2016 reflect the impact
changes U.S. corporate income tax laws by, among other of foreign earnings, which are taxed at lower rates, tax
things, reducing the U.S. corporate income tax rate to 21% benefits related to international and state tax planning
starting in 2018 and creating a territorial tax system with initiatives and the release of uncertain tax position liabilities
a one-time mandatory tax on previously deferred foreign relating to certain statute expirations.
earnings of U.S. subsidiaries. As a result, in the fourth Net income for 2017 was $681.5 million, an increase of
quarter of 2017, the Company recorded a net benefit of $169.3 million or 33.1%, compared with $512.2 million
$91.6 million in the consolidated statement of income as a in 2016. The 2017 realignment costs reduced 2017 net
component of Provision for income taxes. The $91.6 million income by $13.0 million and the net benefit related to
net benefit consisted of a $185.8 million benefit resulting the Act increased 2017 net income by $91.6 million. The
from the remeasurement of the Company’s net deferred 2016 realignment costs and the 2016 impairment charge
tax liabilities in the U.S. based on the new lower corporate reduced 2016 net income by $17.0 million and $8.6 million,
income tax rate and a $94.2 million expense relating to the respectively.
one-time mandatory tax on previously deferred earnings
of certain non-U.S. subsidiaries that are owned either Diluted earnings per share for 2017 were $2.94, an increase
wholly or partially by a U.S. subsidiary of the Company. of $0.75 or 34.2%, compared with $2.19 per diluted share
Also, included in the $94.2 million, the Company recorded in 2016. The 2017 realignment costs had the effect of
additional deferred tax liabilities of $13.3 million related to reducing 2017 diluted earnings per share by $0.05 and the
state income and foreign withholding taxes expected to be net benefit related to the Act had the effect of increasing
incurred when the cash amounts related to the mandatory 2017 diluted earnings per share by $0.39. The 2016
tax are ultimately repatriated to the U.S., offset by realignment costs and the 2016 impairment charge had the
$1.0 million for a remeasurement of uncertain tax positions effect of reducing 2016 diluted earnings per share by $0.07
impacted by the mandatory tax inclusion. and $0.04, respectively.
Although the $91.6 million net benefit represents what the Review of Cash Flows and Financial Position
Company believes is a reasonable estimate of the impact
of the income tax effects of the Act on the Company’s Cash provided by operating activities totaled
consolidated financial statements as of December 31, 2017, $833.3 million in 2017, an increase of $76.5 million
it should be considered provisional. As additional guidance or 10.1%, compared with $756.8 million in 2016. The
from the U.S. Department of Treasury is provided, the increase in cash provided by operating activities for 2017
Company may need to adjust the provisional amounts after was primarily due to higher net income and lower overall
it finalizes the 2017 U.S. tax return and is able to conclude operating working capital levels driven by the Company’s
whether any further adjustments are required to its U.S. continued focus on working capital management.
portion of net deferred tax liability of $390.4 million as of Offsetting the increase in cash provided by operating
December 31, 2017, as well as to the liability associated activities was a $48.0 million increase in defined benefit
with the one-time mandatory tax. The currently recorded pension plan contributions driven by a discretionary
amounts include a variety of estimates of taxable $50.1 million contribution to the Company’s defined benefit
earnings and profits, estimated taxable foreign cash pension plans in the first quarter of 2017, with $40.0 million
balances, differences between U.S. generally accepted contributed to U.S. defined benefit pension plans and
accounting principles (“GAAP”) and U.S. tax principles $10.1 million contributed to foreign defined benefit pension
and interpretations of many aspects of the Act that may, if plans.
changed, impact the final amounts. Any adjustments to Free cash flow (cash flow provided by operating
these provisional amounts will be reported as a component activities less capital expenditures) was $758.2 million
of Provision for income taxes in the reporting period in in 2017, compared with $693.6 million in 2016. EBITDA
which any such adjustments are determined, which will be (earnings before interest, income taxes, depreciation and
no later than the fourth quarter of 2018, and could result in amortization) was $1,076.0 million in 2017, compared with
significant impacts to the effective tax rate for the period. $966.0 million in 2016. Free cash flow and EBITDA are
The Company is still evaluating the potential future impact presented because the Company is aware that they are
of the global intangible low-taxed income (“GILTI”) section measures used by third parties in evaluating the Company.

18