Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 981K
2: EX-31.1 Certification -- §302 - SOA'02 HTML 25K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 25K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 22K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 22K
11: R1 Cover Page HTML 73K
12: R2 Consolidated Statement of Income HTML 85K
13: R3 Condensed Consolidated Statement of Comprehensive HTML 24K
Income
14: R4 Consolidated Balance Sheet HTML 122K
15: R5 Consolidated Statement of Stockholders' Equity HTML 96K
16: R6 Consolidated Statement of Stockholders' Equity HTML 28K
(Parenthetical)
17: R7 Condensed Consolidated Statement of Cash Flows HTML 94K
18: R8 Basis of Presentation HTML 24K
19: R9 Revenues HTML 178K
20: R10 Earnings Per Share HTML 33K
21: R11 Fair Value Measurements HTML 49K
22: R12 Hedging Activities HTML 25K
23: R13 Inventories, net HTML 29K
24: R14 Leases HTML 50K
25: R15 Acquisitions HTML 36K
26: R16 Goodwill HTML 35K
27: R17 Income Taxes HTML 30K
28: R18 Share-Based Compensation HTML 82K
29: R19 Retirement and Pension Plans HTML 51K
30: R20 Contingencies HTML 29K
31: R21 Pay vs Performance Disclosure HTML 33K
32: R22 Insider Trading Arrangements HTML 27K
33: R23 Basis of Presentation (Policies) HTML 27K
34: R24 Revenues (Tables) HTML 180K
35: R25 Earnings Per Share (Tables) HTML 32K
36: R26 Fair Value Measurements (Tables) HTML 46K
37: R27 Inventories, net (Tables) HTML 30K
38: R28 Leases (Tables) HTML 53K
39: R29 Acquisitions (Tables) HTML 30K
40: R30 Goodwill (Tables) HTML 37K
41: R31 Income Taxes (Tables) HTML 27K
42: R32 Share-Based Compensation (Tables) HTML 83K
43: R33 Retirement and Pension Plans (Tables) HTML 47K
44: R34 Revenues - Outstanding Contract Asset and HTML 33K
(Liability) Accounts (Detail)
45: R35 Revenues - Additional Information (Detail) HTML 40K
46: R36 Revenues - Information About Operations in HTML 63K
Different Geographic Areas (Detail)
47: R37 Revenues - Major Products and Services in HTML 48K
Reportable Segments (Detail)
48: R38 Revenues - Timing of Revenue Recognition (Detail) HTML 43K
49: R39 Revenues - Changes in Accrued Product Warranty HTML 30K
Obligation (Detail)
50: R40 Earnings Per Share - Number of Weighted Average HTML 29K
Shares (Detail)
51: R41 Fair Value Measurements - Fair Value of Assets HTML 35K
Measured on Recurring Basis (Detail)
52: R42 Fair Value Measurements - Additional Information HTML 28K
(Detail)
53: R43 Fair Value Measurements - Fair Value Disclosures HTML 27K
of Financial Instrument Liabilities (Detail)
54: R44 Hedging Activities - Additional Information HTML 33K
(Detail)
55: R45 Inventories, net - Inventories (Detail) HTML 30K
56: R46 Leases - Additional Information (Details) HTML 23K
57: R47 Leases- Components of Lease Expense (Detail) HTML 28K
58: R48 Leases - Supplemental Balance Sheet Information HTML 33K
Related to Leases (Detail)
59: R49 Leases - Maturities of lease liabilities (Detail) HTML 39K
60: R50 Acquisitions - Additional Information (Detail) HTML 71K
61: R51 Acquisitions - Allocation of Aggregate Purchase HTML 39K
Price of Acquired Net Assets (Detail)
62: R52 Goodwill - Changes in Carrying Amounts of Goodwill HTML 38K
by Segment (Detail)
63: R53 Income Taxes - Additional Information (Detail) HTML 27K
64: R54 Income Taxes - Reconciliation of Liability for HTML 28K
Uncertain Tax Positions (Detail)
65: R55 Share-Based Compensation - Total Share-Based HTML 29K
Compensation Expense (Detail)
66: R56 Share-Based Compensation - Weighted Average HTML 33K
Assumptions Used for Estimating Fair Values of
Stock Options Granted (Detail)
67: R57 Share-Based Compensation - Summary of Stock Option HTML 61K
Activity and Related Information (Detail)
68: R58 Share-Based Compensation - Additional Information HTML 72K
(Detail)
69: R59 Share-Based Compensation - Summary of Nonvested HTML 57K
Restricted Stock Activity and Related Information
(Detail)
70: R60 Retirement and Pension Plans - Components of Net HTML 46K
Periodic Pension Benefit Expense (Income) (Detail)
71: R61 Retirement and Pension Plans - Additional HTML 24K
Information (Detail)
72: R62 Contingencies - Additional Information (Detail) HTML 41K
75: XML IDEA XML File -- Filing Summary XML 134K
73: XML XBRL Instance -- ame-20230930_htm XML 1.56M
74: EXCEL IDEA Workbook of Financial Report Info XLSX 115K
7: EX-101.CAL XBRL Calculations -- ame-20230930_cal XML 149K
8: EX-101.DEF XBRL Definitions -- ame-20230930_def XML 361K
9: EX-101.LAB XBRL Labels -- ame-20230930_lab XML 1.47M
10: EX-101.PRE XBRL Presentations -- ame-20230930_pre XML 826K
6: EX-101.SCH XBRL Schema -- ame-20230930 XSD 124K
76: JSON XBRL Instance as JSON Data -- MetaLinks 441± 637K
77: ZIP XBRL Zipped Folder -- 0001037868-23-000056-xbrl Zip 245K
(Exact name of registrant as specified in its charter)
_________________________
iDelaware
(State or other jurisdiction of
incorporation or organization)
i1100
Cassatt Road
iBerwyn, iPennsylvania
(Address of principal executive offices)
i14-1682544
(I.R.S. Employer
Identification No.)
i19312-1177
(Zip Code)
Registrant’s telephone number, including area code: (i610) i647-2121
_________________________
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. iYes☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). iYes☒ No ☐
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.
iLarge
accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐ (Do not check if a smaller reporting company)
Smaller reporting company
i☐
Emerging
growth company
i☐
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 i☐ No ☒
_________________________
Securities registered pursuant to Section 12(b) of the Act:
Title
of each class
Trading
Symbol(s)
Name of each exchange on which registered
iCommon Stock
iAME
iNew
York Stock Exchange
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 27, 2023 was i230,798,657 shares.
Issuance
of common stock under employee stock plans
i11,274
i6,068
i18,098
i11,966
Share-based
compensation expense
i12,913
i12,060
i35,773
i34,587
Balance
at the end of the period
i1,148,107
i1,059,079
i1,148,107
i1,059,079
Retained
earnings
Balance at the beginning of the period
i9,372,368
i8,353,735
i8,857,485
i7,900,113
Net
income
i340,370
i297,641
i970,324
i852,461
Cash
dividends paid
(i57,622)
(i50,438)
(i172,693)
(i151,635)
Other
(i2)
i—
(i2)
(i1)
Balance
at the end of the period
i9,655,114
i8,600,938
i9,655,114
i8,600,938
Accumulated
other comprehensive (loss) income
Foreign currency translation:
Balance at the beginning of the period
(i318,359)
(i352,851)
(i368,124)
(i275,365)
Translation
adjustments
(i62,092)
(i110,524)
i568
(i225,100)
Change
in long-term intercompany notes
(i6,994)
(i17,393)
(i1,091)
(i40,512)
Net
investment hedge instruments gain (loss), net of tax of $(i7,126) and $(i14,604)
for the quarter ended September 30, 2023 and 2022 and $(i1,004) and $(i34,212)
for the nine months ended September 30, 2023 and 2022, respectively
i21,881
i44,844
i3,083
i105,053
Balance
at the end of the period
(i365,564)
(i435,924)
(i365,564)
(i435,924)
Defined
benefit pension plans:
Balance at the beginning of the period
(i203,637)
(i193,079)
(i206,821)
(i195,079)
Amortization
of net actuarial loss and other, net of tax of $(i518) and $(i326)
for the quarter ended September 30, 2023 and 2022 and $(i1,554) and $(i977)
for the nine months ended September 30, 2023 and 2022, respectively
i1,592
i1,000
i4,776
i3,000
Balance
at the end of the period
(i202,045)
(i192,079)
(i202,045)
(i192,079)
Accumulated
other comprehensive loss at the end of the period
(i567,609)
(i628,003)
(i567,609)
(i628,003)
Treasury
stock
Balance at the beginning of the period
(i1,895,628)
(i1,901,360)
(i1,902,964)
(i1,573,000)
Issuance
of common stock under employee stock plans
iThe 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, 2023, the consolidated results of its operations for the three and nine months ended September 30, 2023 and 2022
and its cash flows for the nine months ended September 30, 2023 and 2022 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, 2022 as filed with the U.S. Securities and Exchange Commission.
2. iRevenues
i
The
outstanding contract asset and liability accounts were as follows:
Change
in contract liabilities – (increase) decrease
(i23,723)
(i42,595)
Net
change
$
(i3,693)
$
(i26,182)
/
The
net change for the nine months ended September 30, 2023 was primarily driven by contract liabilities, specifically growth in advance payments from customers. For the nine months ended September 30, 2023 and 2022, the Company recognized revenue of $i297.7
million and $i252.4 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, 2023 and December 31,
2022, $i59.4 million and $i41.0 million of Customer advanced payments (contract liabilities), respectively, were
recorded in Other long-term liabilities in the consolidated balance sheets.
The remaining performance obligations not expected to be completed within one year as of September 30, 2023 and December 31, 2022 were $i570.7 million and $i526.0
million, respectively. Remaining performance obligations represent the transaction price of firm, non-cancelable 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 ithree years.
Net sales were attributed to geographic areas based on the location of the customer. iInformation about the
Company’s operations in different geographic areas was as follows for the three and nine months ended September 30:
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 and other in the consolidated balance sheet.
i
Changes
in the accrued product warranty obligation were as follows:
Warranty
accruals related to acquired businesses and other during the period
i21
(i1,080)
Balance
at the end of the period
$
i31,351
$
i26,159
/i
Accounts
Receivable
The Company maintains allowances for estimated losses resulting from the inability of customers to meet their financial obligations to the Company. The Company recognizes an allowance for credit losses, on all accounts receivable and contract assets, which considers risk of future credit losses based on factors such as historical experience, contract terms, as well as general and market business conditions, country, and political risk. Balances are written off when determined to
be uncollectible.
At September 30, 2023, the Company had $i936.8
million of accounts receivable, net of allowances of $i13.9 million. Changes in the allowance were not material for the three and nine months ended September 30, 2023.
3. iEarnings
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). iThe number of weighted average shares used in the calculation of basic earnings per share and diluted earnings per share was as follows:
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.
i
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, 2023 and December 31, 2022:
The
fair value of mutual fund investments is based on quoted market prices. The mutual fund investments are shown as a component of investments and other assets on the consolidated balance sheet.
For the nine months ended September 30, 2023 and 2022, gains and losses on the investments noted above were not significant. iiNo/ transfers
between level 1 and level 2 investments occurred during the nine months ended September 30, 2023 and 2022.
At September 30, 2023, the
Company had a Euro forward contract for a total notional value of i40.0 million Euros. The foreign currency forward contract is valued as a level 2 liability as it is corroborated by foreign currency exchange rates and shown as a component of other current liabilities on the consolidated balance sheet. For the nine months ended September 30,
2023, realized and unrealized gains and losses on the foreign currency forward contracts were not significant.
Financial Instruments
Cash, cash equivalents and mutual fund investments are recorded at fair value at September 30, 2023 and December 31, 2022 in the accompanying consolidated balance sheet.
i
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, 2023 and December 31, 2022:
The
fair value of net short-term borrowings approximates the carrying value. 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.
5. iHedging 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, 2023, these net investment hedges included British-pound-and Euro-denominated long-term debt. These borrowings were designed to create net investment hedges in certain designated foreign subsidiaries. The Company designated the British-pound- and Euro-denominated loans 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, 2023, the Company had $i274.8 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, 2023, the Company had $i562.1 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 i100%
effective as net investment hedges, $i4.1 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, 2023.
The
Company has commitments under operating leases for certain facilities, vehicles and equipment used in its operations. Cash used in operations for operating leases was not materially different from operating lease expense for the nine months ended September 30, 2023 and 2022. The Company's leases have a weighted average remaining lease term of approximately i5 years. Certain lease agreements contain provisions for future rent increases.
The
Company spent $i246.7 million in cash, net of cash acquired, to acquire Bison Gear & Engineering Corp. ("Bison") in March 2023 and United Electronic Industries ("UEI") in August 2023. Bison is a leading manufacturer of highly engineered motion control solutions serving diverse markets and applications. Bison is part of EMG. UEI is a leading provider of data acquisition and control solutions for the aerospace, defense, energy and semiconductor industries. UEI is part of EIG.
i
The
following table represents the allocation of the purchase price for the net assets of the 2023 acquisitions based on the estimated fair values at acquisition (in millions):
Property, plant and equipment
$
i13.4
Goodwill
i82.6
Other
intangible assets
i124.0
Net
working capital and other(1)
i26.7
Total
cash paid
$
i246.7
________________
(1)Includes $i12.9
million in accounts receivable, whose fair value, contractual cash flows and expected cash flows are approximately equal.
/
The amount allocated to goodwill is reflective of the benefits the Company expects to realize from the acquisitions. Bison's engineering expertise and broad product portfolio complement the Company's existing motion control and automation solutions business. UEI's innovative solutions complement the Company's existing testing and data acquisition expertise. The
Company expects approximately $i73.5 million of the goodwill relating to the acquisitions will be tax deductible in future years.
At September 30, 2023, the purchase price allocated to other intangible assets of $i124.0
million consists of $i23.8 million of indefinite-lived intangible trade names, which are not subject to amortization. The remaining $i100.2 million of other intangible assets consists of $i75.8
million of customer relationships, which are being amortized over a period of i20 years, and $i24.4 million of purchased technology, which is being amortized over a period of i10
to i20 years. Amortization expense for each of the next five years for the 2023 acquisition is expected to approximate $iiiiii5/////
million per year.
The Company finalized its measurements of certain tangible and intangible assets and liabilities for its September 2022 acquisition of Navitar, Inc. and its October 2022 acquisition of RTDS Technologies, which had no material impact to the consolidated statement of income and balance sheet. The Company has substantially completed its purchase accounting, however it is in the process of finalizing the accounting for income taxes, for its acquisition of Bison. The Company is in the process of finalizing the measurement of the intangible assets and tangible assets and liabilities for its acquisition of UEI.
The
acquisitions had an immaterial impact on reported net sales, net income, and diluted earnings per share for the three and nine months ended September 30, 2023. Had the acquisitions been made at the beginning of 2023 or 2022, pro forma net sales, net income, and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022, would not have been materially different than the amounts reported.
In October 2023, the Company acquired Amplifier Research Corp., for approximately $i105 million
in cash. Amplifier Research has estimated annual sales of approximately $i60 million. Amplifier Research is a leading manufacturer of radio frequency and microwave amplifiers and electromagnetic compatibility testing equipment. Amplifier Research has joined EIG.
In October 2023, the Company entered into a definitive agreement to acquire Paragon Medical, for approximately $i1.9 billion
in cash. Paragon Medical has estimated annual sales of approximately $i500 million. Paragon Medical is a leading provider of medical components and instruments. Paragon Medical serves a wide range of specialty applications including orthopedics, minimally invasive surgery, robotic surgery, and drug delivery. Paragon's product portfolio includes single-use and consumable surgical instruments and implantable components sold to a diverse blue-chip customer base of leading medical
device manufacturers. The transaction is subject to customary closing conditions, including applicable regulatory approvals. Paragon Medical will join EMG.
9. iGoodwill
i
The
changes in the carrying amounts of goodwill by segment were as follows:
At September 30, 2023, the Company had gross uncertain tax benefits of $i207.4 million, of which $i153.9
million, if recognized, would impact the effective tax rate.
i
The following is a reconciliation of the liability for uncertain tax positions (in millions):
The additions above primarily reflect the tax positions for foreign tax planning initiatives. 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, 2023 and 2022 were not significant.
The effective tax rate for the three months ended September 30, 2023 was i17.7%, compared with i19.0%
for the three months ended September 30, 2022. The lower effective tax rate in the third quarter of 2023 primarily reflects greater utilization of research and development credits.
11. iShare-Based Compensation
The
Company's share-based compensation plans are described in Note 11, Share-Based Compensation, to the consolidated financial statements in Part II, Item 8, filed on the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Share Based Compensation Expense
i
Total share-based compensation expense was as follows:
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.
Stock Options
The fair value of each stock option grant is estimated on the grant date using a Black-Scholes-Merton option pricing model. iThe
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:
The
aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2023 was $i42.5 million. The total fair value of stock options vested during the nine months ended September 30, 2023 was $i12.8
million. As of September 30, 2023, there was approximately $i21.9 million of expected future pre-tax compensation expense related to the i0.9
million non-vested stock options outstanding, which is expected to be recognized over a weighted average period of approximately itwo years.
The
total fair value of restricted stock vested during the nine months ended September 30, 2023 was $i16.3 million. As of September 30, 2023, there was approximately $i28.8
million of expected future pre-tax compensation expense related to the i0.3 million non-vested restricted shares outstanding, which is expected to be recognized over a weighted average period of approximately itwo
years.
Performance Restricted Stock Units
In March 2023, the Company granted performance restricted stock units ("PRSU") to officers and certain key management-level employees. The PRSUs vest over a period up to ithree years from the grant date based on continuous service, with the number of shares earned (i0%
to i200% 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 of the year of grant to December 31 of the third year. 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.
The following is a summary of the
Company’s non-vested performance restricted stock activity and related information:
Shares
Weighted Average Grant Date Fair Value
(In thousands)
Non-vested performance restricted stock outstanding at December 31, 2022
i275
$
i101.98
Granted
i79
i138.46
Performance
assumption change 1
i48
i63.37
Vested
(i161)
i63.37
Forfeited
(i2)
i131.76
Non-vested
performance restricted stock outstanding at September 30, 2023
i239
$
i131.90
_________________________________________
1
Reflects the number of PRSUs above target levels based on performance metrics.
As of September 30, 2023, there was approximately $i7.6
million of expected future pre-tax compensation expense related to the i0.2 million non-vested restricted shares outstanding, which is expected to be recognized over a weighted average period of approximately ione
year.
12. iRetirement and Pension Plans
i
The components of net periodic pension benefit expense
(income) were as follows:
For
defined benefit plans, the net periodic benefit income, other than the service cost component, is included in “Other (expense) income, net” in the consolidated statement of income.
For the nine months ended September 30, 2023 and 2022, contributions to the Company’s defined benefit pension plans were $i3.9 million and $i5.2
million, respectively. The Company’s current estimate of 2023 contributions to its worldwide defined benefit pension plans is in line with the range disclosed in Note 12 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
13. iContingencies
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.
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, 2023, the Company is named a Potentially Responsible Party (“PRP”) at i13 non-AMETEK-owned former
waste disposal or treatment sites (the “non-owned” sites). The Company is identified as a “de minimis” party in i12 of these sites based on the low volume of waste attributed to the Company relative to the amounts attributed to other named PRPs. In ieight
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 ifour 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, 2023 and December 31, 2022 were $i39.7 million
and $i41.1 million, respectively, for both non-owned and owned sites. For the nine months ended September 30, 2023, the Company recorded $i4.7 million
in reserves. Additionally, the Company spent $i6.1 million on environmental matters for the nine months ended September 30, 2023.
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.
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. 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.
For
the quarter ended September 30, 2023, the Company posted record operating income, operating margins, net income, and diluted earnings per share. We achieved these results from contributions from the acquisitions of Navitar in September 2022, RTDS in October 2022, Bison Gear & Engineering Corp. ("Bison") in March 2023, and United Electronic Industries ("UEI") in August 2023, as well as our Operational Excellence initiatives. We continue to experience heightened levels of inflation in material costs, supply chain constraints, as well as continued uncertainty in the global economy, including inventory normalization on short-term customer demand. We continue to evaluate the extent to which these factors will impact our business, financial condition, and results of operations. For 2023, our strong backlog, the full
year impact of the 2022 acquisitions, the 2023 acquisitions of Bison and UEI, and continued focus on and implementation of our Operational Excellence initiatives are expected to have a positive impact on the remainder of our 2023 results.
Results of operations for the third quarter of 2023 compared with the third quarter of 2022
Net sales for the third quarter of 2023 were $1,622.8 million, an increase of $71.0 million or 4.6%, compared with net sales of $1,551.8 million for the third quarter of 2022. The increase in net sales for the third quarter of 2023 was due to a 4% increase from acquisitions and a 1% favorable effect of foreign currency translation.
Total international sales for the third quarter of 2023 were $731.7 million or 45.1% of net sales, a decrease of $1.3 million or 0.2%, compared with international sales of $733.0 million
or 47.2% of net sales for the third quarter of 2022.
Orders for the third quarter of 2023 were $1,550.6 million, a decrease of $107.3 million or 6.5%, compared with $1,657.9 million for the third quarter of 2022. The decrease in orders for the third quarter of 2023 was due to a 10% decline in organic orders, partially offset by a 1% increase from acquisitions and a 3% favorable effect of foreign currency translation. The Company's backlog of unfilled orders at September 30, 2023 was $3,369.7 million, an increase of $151.1 million or 4.7% compared with $3,218.6 million at December 31, 2022.
Segment operating income for the third quarter of 2023 was $462.7 million,
an increase of $53.5 million or 13.1%, compared with segment operating income of $409.2 million for the third quarter of 2022. Segment operating margins, as a percentage of net sales, increased to 28.5% for the third quarter of 2023, compared with 26.4% for the third quarter of 2022. Segment operating income and operating margins were positively impacted in 2023 by increased sales in our higher margin businesses, as well as continued benefits from the Company's Operational Excellence initiatives.
Cost of sales for the third quarter of 2023 was $1,020.9 million or 62.9% of
net sales, an increase of $16.3 million or 1.6%, compared with $1,004.6 million or 64.7% of net sales for the third quarter of 2022. The cost of sales increase was primarily due to the net sales increase discussed above.
Selling, general and administrative expenses for the third quarter of 2023 were $163.8 million or 10.1% of net sales, an increase of $1.1 million or 0.7%, compared with $162.7 million or 10.5% of net sales for the third quarter of 2022. General and administrative expenses for the third quarter of 2023 were $24.6 million, compared with $24.7 million for the third quarter of 2022.
Consolidated operating income was a record $438.1 million or a record 27.0% of net sales for the third quarter of 2023, an increase of $53.6 million or 13.9%, compared with $384.5 million or 24.8% of net sales for the third quarter of 2022.
Other
expense, net was $6.3 million for the third quarter of 2023, compared with $3.2 million of other income, net for the third quarter of 2022, a change of $9.5 million. The third quarter of 2023 includes lower pension income of $5.1 million and higher acquisition-related due diligence expense compared to the third quarter of 2022.
The effective tax rate for the third quarter of 2023 was 17.7%, compared with 19.0% for the third quarter of 2022. The lower effective tax rate in the third quarter of 2023 primarily reflects greater utilization of research and development credits.
Net income for the third quarter of 2023 was a record $340.4 million, an increase of $42.8 million or 14.4%, compared with $297.6 million for the third quarter of 2022.
Diluted earnings per share for the third quarter of 2023 were a record $1.47, an increase of $0.18
or 14.0%, compared with $1.29 per diluted share for the third quarter of 2022.
Segment Results
EIG’s net sales totaled $1,136.1 million for the third quarter of 2023, an increase of $82.0 million or 7.8%, compared with $1,054.1 million for the third quarter of 2022. The net sales increase was due to a 3% increase in organic sales, a 4% increase from the recent acquisitions, and a 1% favorable effect of foreign currency translation.
EIG’s operating income was a record $335.2 million for the third quarter of 2023, an increase of $62.5 million or 22.9%, compared with $272.7 million for the third quarter of 2022. EIG’s operating margins were a record 29.5% of net sales for the third quarter of 2023, compared with 25.9% for the third quarter of 2022. EIG's operating margins increased in the
third quarter of 2023 compared to the third quarter of 2022 due to the sales increase discussed above, which was primarily driven by our higher margin businesses, as well as continued benefits from the Company's Operational Excellence initiatives.
EMG’s net sales totaled $486.7 million for the third quarter of 2023, a decrease of $11.0 million or 2.2%, compared with $497.7 million for the third quarter of 2022. The net sales decrease was due to an 8% organic sales decrease, partially offset by a 4% increase from the 2023 acquisition and a 2% favorable effect of foreign currency translation.
EMG’s operating income was $127.5 million for the third quarter of 2023, a decrease of $9.0 million or 6.6%, compared with $136.5 million for the third quarter of 2022. EMG’s operating
margins were 26.2% of net sales for the third quarter of 2023, compared with 27.4% for the third quarter of 2022. EMG's operating margins decreased in the third quarter of 2023 compared to the third quarter of 2022 due to the sales decrease discussed above. EMG's operating margins in the third quarter of 2023 were negatively impacted 40 basis points by the dilutive impact of the 2023 acquisition.
Results of operations for the first nine months of 2023 compared with the first nine months of 2022
Net sales for the first nine months of 2023 were $4,866.1 million, an increase of $341.2 million or 7.5%, compared with net sales of $4,524.9 million for the first nine months of 2022. The increase in net sales for the first nine months of 2023 was due to a 4% organic sales
increase and a 3% increase from acquisitions.
Total international sales for the first nine months of 2023 were $2,306.0 million or 47.4% of net sales, an increase of $107.4 million or 4.9%, compared with international sales of $2,198.6 million or 48.6% of net sales for the first nine months of 2022. The increase in international sales was primarily driven by strong demand in Europe and Asia as well as contributions from the 2022 acquisitions.
Orders for the first nine months of 2023 were $5,017.1 million, an increase of $11.8 million or 0.2%, compared with $5,005.3 million for the first nine months of 2022. The increase
in orders for the first nine months of 2023 was due to a 3% increase from acquisitions and a 2% favorable effect of foreign currency translation, partially offset by an organic order decrease.
Segment operating income for the first nine months of 2023 was $1,336.2 million, an increase of $164.5 million or 14.0%, compared with segment operating income of $1,171.7 million for the first nine months of 2022. Segment operating margins, as a percentage of net sales, increased to 27.5% for the first nine months of 2023, compared with 25.9% for the first nine months of 2022. Segment operating income and operating margins were positively impacted in 2023 by the increase in sales discussed above, which was primarily driven by our higher margin businesses, as well as continued benefits from the Company's Operational Excellence initiatives. In the first
nine months of 2022, segment operating income included a $7.1 million gain on the sale of a facility which increased operating margins by 20 basis points.
Cost of sales for the first nine months of 2023 was $3,096.6 million or 63.6% of net sales, an increase of $155.0 million or 5.3%, compared with $2,941.6 million or 65.0% of net sales for the first nine months of 2022. The cost of sales increase was primarily due to the net sales increase discussed above.
Selling, general and administrative expenses for the first nine months of 2023 were $507.0 million or 10.4% of net sales, an increase of $26.3 million or 5.5%, compared with $480.7 million or 10.6% of net sales for the first nine months of 2022. Selling expenses increased primarily due to the net sales increase discussed above. General and administrative expenses for the first nine months of 2023 were $73.8 million, compared
with $69.0 million for the first nine months of 2022. The general and administrative expenses in the first nine months of 2023 include higher employee compensation costs compared to the first nine months of 2022.
Consolidated operating income was $1,262.5 million or 25.9% of net sales for the first nine months of 2023, an increase of $159.9 million or 14.5%, compared with $1,102.6 million or 24.4% of net sales for the first nine months of 2022.
Other expense, net was $15.3 million for the first nine months of 2023, compared with $7.8 million of other income, net for the first nine months of 2022, a change of $23.1 million. The first nine months of 2023 includes $15.4 million of lower pension income and higher acquisition-related due diligence expense compared to the first nine months of 2022.
The effective tax rate for the first nine
months of 2023 was 18.4%, compared with 18.8% for the first nine months of 2022. The lower effective rate for the nine months of 2023 primarily reflects greater utilization of research and development credits.
Net income for the first nine months of 2023 was $970.3 million, an increase of $117.8 million or 13.8%, compared with $852.5 million for the first nine months of 2022.
Diluted earnings per share for the first nine months of 2023 were $4.19, an increase of $0.51 or 13.9%, compared with $3.68 per diluted share for the first nine months of 2022.
Segment Results
EIG’s net sales totaled $3,388.0 million for the first nine months of 2023, an increase of $317.9 million or 10.4%, compared with $3,070.1 million for the first nine months of 2022. The net sales increase was
due to a 7% organic sales increase and a 3% increase from acquisitions.
EIG’s operating income was $952.0 million for the first nine months of 2023, an increase of $169.4 million or 21.6%, compared with $782.6 million for the first nine months of 2022. EIG’s operating margins were 28.1% of net sales for the first nine months of 2023, compared with 25.5% for the first nine months of 2022. EIG operating margins increased in the first nine months of 2023 compared to the first nine months of 2022, due to the increase in net sales discussed above, as well as continued benefits from the Company's Operational Excellence initiatives.
EMG’s net sales totaled $1,478.0 million for the first nine months of 2023, an increase of $23.3 million or 1.6%, compared with $1,454.7 million for
the first nine months of 2022. The net sales increase was due to a 3% increase from acquisitions, partially offset by an organic sales decrease .
EMG’s operating income was $384.3 million for the first nine months of 2023, a decrease of $4.7 million or 1.2%, compared with $389.0 million for the first nine months of 2022. EMG’s operating margins were 26.0% of net sales for the first
nine months of 2023, compared with 26.7% for the first nine months of 2022. EMG's operating margins were negatively impacted by the dilutive impact of the 2023 acquisition. For the first nine months of 2022, EMG's operating income included
a $7.1 million gain on the sale of a facility, which increased EMG operating margins by 40 basis points. Excluding the dilutive impact of the 2023 acquisition and the gain on the sale of a facility, EMG operating margins for the first nine months of 2023 increased 50 basis points compared to the first nine months of 2022.
Financial Condition
Liquidity and Capital Resources
Cash provided by operating activities totaled $1,194.6 million for the first nine months of 2023, an increase of $430.2 million or 56.3%, compared with $764.4 million for the first nine months of 2022. The increase in cash provided by operating activities for the first nine months of 2023 was primarily due to improved working capital management and higher
net income.
Free cash flow (cash flow provided by operating activities less capital expenditures) was $1,118.1 million for the first nine months of 2023, compared with $683.5 million for the first nine months of 2022. EBITDA (earnings before interest, income taxes, depreciation and amortization) was $1,488.3 million for the first nine months of 2023, compared with $1,340.3 million for the first nine months of 2022. 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 by investing activities totaled $326.3 million for the first nine months of 2023, compared with cash used by investing activities of $255.5 million for
the first nine months of 2022. For the first nine months of 2023, the Company paid $246.7 million, net of cash acquired, to purchase Bison and UEI. For the first nine months of 2022, the Company received $11.8 million from the sale of a facility. Additions to property, plant and equipment totaled $76.5 million for the first nine months of 2023, compared with $80.8 million for the first nine months of 2022.
Cash used by financing activities totaled $364.8 million for the first nine months of 2023, compared with cash used by financing activities of $501.2 million for the first nine months of 2022. At September 30, 2023, total debt, net was $2,160.6 million, compared with $2,385.0 million at December 31,
2022. For the first nine months of 2023, total borrowings decreased by $220.6 million compared with a $26.3 million decrease for the first nine months of 2022. At September 30, 2023, the Company had available borrowing capacity of $2,972.3 million under its revolving credit facility, including the $700 million accordion feature.
The debt-to-capital ratio was 20.6% at September 30, 2023, compared with 24.2% at December 31, 2022. 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 13.6% at September 30, 2023, compared with 21.4% at December 31,
2022. 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 2023 included cash dividends paid of $172.7 million, compared with $151.6 million for the first nine months of 2022. Effective February 9, 2023, the Company’s Board of Directors approved a 14% increase in the quarterly cash dividend on the Company’s common stock to $0.25 per common share from $0.22 per common share. The
Company repurchased $6.6 million of its common stock for the first nine months of 2023, compared with $331.4 million for the first nine months of 2022. Proceeds from stock option exercises were $40.1 million for the first nine months of 2023, compared with $23.2 million for the first nine months of 2022.
As a result of all of the Company’s cash flow activities for the first nine months of 2023, cash and cash equivalents at September 30, 2023 totaled $841.9 million, compared with $345.4 million at December 31, 2022. At September 30, 2023, the Company had $354.1 million in cash outside the United States,
compared with $334.1 million at December 31, 2022. 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.
In October 2023, the Company acquired Amplifier Research Corp., for approximately $105 million in cash. Amplifier Research has estimated annual sales of approximately $60 million. Amplifier Research is a leading manufacturer of radio frequency and microwave amplifiers and electromagnetic compatibility testing equipment. Amplifier Research will join EIG.
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, 2022. 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.
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 risks related to the Company’s ability to consummate and successfully integrate future acquisitions; risks associated with international sales and operations, including supply chain disruptions; 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; changes in the competitive environment or the effects of competition in the Company’s markets; the ability to maintain adequate liquidity and financing sources; and general
economic conditions affecting the industries the Company serves. 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, 2023. 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, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
(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 $1 billion authorization for the repurchase of its common stock announced in May 2022. Such purchases may be effected from time to time in the open market or in private transactions, subject to market conditions and at management’s discretion.
Item 5. Other Information
Insider Trading
Arrangements and Policies
During the quarter ended September 30, 2023, iiiino
director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K///.
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.
