The Measurement, Control & Automation Association (MCAA, www.measure.org) published its annual benchmark report on the operating performance of its member companies. Each year, the association collects information on the operating performance of its members, which are generally North American manufacturers and distributors of instrumentation, systems, and software used in industrial process control and factory automation. Companies contribute their financial statement information, and the association aggregates the information into a report. Data is arrayed in groups by sales volume size.
The document, titled “2006 Operating Benchmark Report,” covers years 2001-2005 for companies in the measurement control and automation industry. Thirty-six member companies, including 10 public companies provided data for the report. In addition, the report includes a section on 15 industry companies from publicly available data. An overview of the results was presented to participants in the 2006 Executive Forum held at the Hotel Royal Plaza in Orlando, Florida in May.
In reviewing the performance of public companies from publicly available data, the report showed: ”05 revenues increased 11.7 percent over ”04 revenues; operating income increased 20.3 percent over ”04 operating income; and ”05 operating income as a percent of revenues increased to 11.6 percent from 10.7 percent in ”04.
There were a number of industry participants with revenue growth in the mid teens and higher, according to MCAA. There were also a number of industry leaders with operating income as a percent of revenue in the mid teens and higher.
Going a level deeper in the statistics, two trends are noticeable. First, the acquisition-oriented organizations with well-defined and well-communicated business processes led the performance statistics in both growth and income statistics. Second, a number of the lower performers in both categories were large international firms with headquarters outside the United States. According to MCAA, one must be cautious in considering such an observation on its face, because a number of these organizations adhere to different economic models and their accounting may not be a fair reflection of their cash flow.
For MCAA”s public member companies 2005 appears to have been a good year, especially when compared with 2001. Gross profit increased by 4.9 percentage points, expenses decreased 1.2 points, and operating income increased 6.1 points. In dollars, operating income increased by 89.4 percent over the five year period. However, R&D expense decreased by 1.8 points over the five years.
For the MCAA members in the three categories under $100 million in net sales the results were strong — but not as strong as the larger public companies. Over the five-year period, sales increased from 13.7 percent to 35.7 percent depending on the group. Over the same period, gross profit percentages were relatively stable, reflecting less operating leverage than the large public companies. Operating expenses decreased from .9 to 3.9 points, with the smallest companies having the biggest declines, reflecting, according to MCAA, the inability of small companies to reduce administrative costs beyond a certain level in a downturn and their improved ability to absorb such costs as sales increase.
Operating income increased a healthy 1.9 to 3.7 points with the smallest companies showing the biggest improvements. A point to note, according to MCAA, while the larger public companies were reducing R&D over the five year period, two of the three smaller groups increased R&D almost every year and, in 2005, by 10-15 percent.