AMETEK, Inc. — FY2023 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2023, compared primarily with FY2022. AMETEK manufactures electronic instruments and electromechanical products through Electronic Instruments (EIG) and Electromechanical (EMG), serving industrial, process, aerospace, power, medical and automation markets. The filing does not provide a separate Q4 financial summary.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Net sales | $6,597.0 million | $6,150.5 million | +7.3%; 4% organic growth and 3% from acquisitions |
| Operating income | $1,707.5 million | $1,500.7 million | +13.8% |
| Operating margin | 25.9% | 24.4% | +1.5 percentage points |
| Net income | $1,313.2 million | $1,159.5 million | +13.3% |
| Diluted EPS | $5.67 | $5.01 | +13.2% |
| Operating cash flow | $1,735.3 million | $1,149.4 million | +51.0% |
| Free cash flow | $1,599.1 million | $1,010.4 million | Up $588.7 million |
- Cost of sales was 63.9% of sales, versus 65.1% in 2022; SG&A was 10.3%, versus 10.5%. The effective tax rate decreased to 18.3% from 18.8%.
- EIG sales rose 9.3% to $4,624.3 million; operating income rose 20.3% to $1,311.0 million and margin increased to 28.3% from 25.8%.
- EMG sales rose 2.7% to $1,972.7 million, reflecting acquisition growth partly offset by an organic decline. Operating income fell 1.4% to $496.6 million and margin declined to 25.2% from 26.2%. Acquisitions diluted 2023 margin; 2022 included a $7.1 million facility-sale gain.
- Orders increased 4.1% to $6,912.4 million, driven by acquisitions and favorable currency effects despite an organic order decrease. Year-end backlog reached a record $3,534.1 million, up 9.8%.
- International sales were $3,128.2 million, or 47.4% of consolidated sales, compared with 48.7% in 2022. EBITDA, a non-GAAP measure, was $2,014.7 million versus $1,829.7 million.
Liquidity, debt and capital deployment
- Cash and cash equivalents were $409.8 million at year-end, compared with $345.4 million. Total debt, net was $3,313.3 million, up from $2,385.0 million; net debt was $2,903.5 million. Net debt-to-capitalization rose to 25.0% from 21.4%.
- Available borrowing capacity under the revolving credit facility, including its accordion feature, was $1,829.3 million. Revolver borrowings were $1,116.0 million; the facility matures in May 2027. The company reported compliance with debt covenants.
- Cash used in investing activities was $2,376.4 million, including $2,237.9 million, net of acquired cash, for four acquisitions. Cash provided by financing activities was $697.3 million, including $892.3 million of increased borrowings.
- Capital expenditures were $136.2 million. Dividends paid were $230.3 million; the company repurchased $7.8 million of shares, compared with $332.8 million in 2022.
- Purchase obligations totaled $790.0 million, including $723.6 million due within one year. Outstanding letters of credit and surety bonds related to guarantees were $193.6 million; the maximum future payment amount under the guarantees was $302.5 million.
Outlook, commentary, risks and unusual items
- Management reported record sales, operating income, margins, net income, EPS, orders, backlog and operating cash flow, attributing performance to organic growth, acquisitions and Operational Excellence. The company targets double-digit annual sales and EPS growth over the business cycle; this is a strategic goal, not specific FY2024 guidance.
- For 2024, capital expenditures are expected to be approximately 2% of sales. The Board approved a 12% quarterly dividend increase, to $0.28 per share, effective February 9, 2024. Management said cash generation, available credit and access to capital should cover foreseeable operating needs and obligations.
- Four 2023 acquisitions—Bison, UEI, Amplifier Research and Paragon Medical—cost $2,237.9 million in cash, net of cash acquired. Purchase-price accounting for Paragon, UEI and Amplifier Research remained incomplete at year-end; the final valuations and related tax accounting could change, potentially materially. The acquisitions had an immaterial reported impact on 2023 sales, net income and diluted EPS.
- Goodwill was not impaired in the annual 2023 test. The company recorded an immaterial non-cash impairment charge for certain indefinite-lived trade names, citing higher discount rates and lower forecast sales growth. Goodwill and other intangible assets totaled $10,612.9 million, or 71% of total assets.
- Key risks include cyclical and variable customer demand, international and foreign-exchange exposure, supply constraints and commodity prices, competition, acquisition integration, skilled-worker availability, cybersecurity, and environmental and regulatory obligations. The company reported $233.5 million of gross unrecognized tax benefits at year-end.
- Environmental reserves were $37.1 million; AMETEK was a potentially responsible party at 12 non-owned sites. Management did not expect known environmental matters or other legal proceedings to materially affect results, financial position or cash flows. Certain asbestos claims relate to an acquired business and are being defended by the seller under indemnification.
- Ernst & Young issued an unqualified opinion on the financial statements and internal controls. Management and the auditor excluded the four 2023 acquisitions from the internal-control assessment; those businesses represented 15.8% of year-end assets and 1.7% of FY2023 sales.
Important facts for investors to verify
- Review the trajectory of organic orders and EMG’s organic sales and margins against the record backlog, including the margin effects of acquisition integration.
- Assess debt and refinancing needs: $1,417.9 million of debt was classified as current, including revolver amounts the company expected, but was not required, to repay in 2024.
- Track final purchase accounting for Paragon, UEI and Amplifier Research, acquisition performance, and expected amortization; acquired intangibles are expected to add substantial ongoing amortization expense.
- Evaluate cash conversion and working-capital performance, given the sharp operating-cash-flow increase and the large acquisition cash outlay.
- Monitor goodwill and intangible-asset valuations, uncertain tax positions, environmental reserves and other contingencies for changes that could affect earnings or cash flows.