AMETEK, Inc. — FY 2021 Form 10-K
Business context and reporting period
AMETEK manufactures electronic instruments and electromechanical products through Electronic Instruments (EIG) and Electromechanical (EMG). This filing covers the fiscal year ended December 31, 2021; it is an annual report, and the provided filing text does not give a clear standalone Q4 financial summary.
Financial performance and liquidity
| Metric | FY 2021 | FY 2020 | Change |
|---|---|---|---|
| Net sales | $5,546.5 million | $4,540.0 million | +22.2% |
| Operating income | $1,308.7 million | $1,027.9 million | +27.3% |
| Operating margin | 23.6% | 22.6% | +1.0 percentage point |
| Net income | $990.1 million | $872.4 million | +13.5% |
| Diluted EPS | $4.25 | $3.77 | +12.7% |
| Cash from operations | $1,160.5 million | $1,281.0 million | -9.4% |
| Free cash flow (non-GAAP) | $1,049.8 million | $1,206.8 million | Lower |
| EBITDA (non-GAAP) | $1,594.3 million | $1,421.6 million | Higher |
EIG sales were $3,763.8 million (+25.9%) and operating income was $958.2 million; EMG sales were $1,782.8 million (+15.0%) and operating income was $437.4 million. Segment operating margin rose to 25.2% from 24.1%. Consolidated sales growth reflected 15% organic growth, 7% contribution from acquisitions and a favorable 1% currency effect, partly offset by divestitures. Orders increased 40.0% to $6,474.4 million; year-end backlog rose 51.5% to a record $2,730.1 million.
Cash from operations declined primarily because of higher working-capital requirements. Capital expenditures were $110.7 million, and cash used for six acquisitions was $1,959.2 million, net of cash acquired. Cash and equivalents fell to $346.8 million from $1,212.8 million. Total debt, net was $2,544.2 million versus $2,413.7 million; net debt was $2,197.4 million. Net debt-to-capitalization increased to 24.2% from 16.8%. The company reported $2,447.5 million of available borrowing capacity, including the accordion feature, and said it was in compliance with debt covenants.
Material changes and unusual items
- Six 2021 acquisitions accounted for $1,959.2 million of cash consideration. Abaco represented $1,344.5 million; the acquisitions added goodwill and intangible assets. Management said acquisitions diluted consolidated operating margin by 110 basis points.
- FY 2020 results included a $141.0 million pretax gain on the sale of Reading Alloys and $43.7 million of realignment costs. These items affect year-over-year comparisons; 2020 diluted EPS included a $0.47 after-tax gain per share and a $0.15 after-tax realignment charge per share.
- The effective tax rate was 19.1%, compared with 19.4%. The annual impairment tests found no impairment of goodwill or indefinite-lived intangible assets.
Outlook, management commentary and risks
Management reported continued sequential recovery from the pandemic-related downturn and record annual results. It cited inflation in material costs, logistics challenges, labor availability and component shortages, and said it was taking steps to mitigate these pressures. No specific full-year 2022 sales or EPS guidance is provided in the supplied filing text. The company expected 2022 capital expenditures of approximately 2% of sales and estimated worldwide defined-benefit pension contributions of $8 million to $12 million. The quarterly dividend was raised to $0.22 per share effective February 2022.
Key disclosed risks include pandemic-related disruption, economic and end-market cyclicality, supply constraints and cost inflation, international and foreign-exchange exposure, cybersecurity, regulatory and environmental liabilities, acquisition execution, and competition. Goodwill and other intangible assets totaled $8.6 billion, or 72% of total assets, increasing the significance of future impairment risk. Environmental reserves were $37.2 million; management did not expect environmental matters or existing legal proceedings to have a material adverse effect. Purchase obligations totaled $890.9 million, including $840.4 million due within one year.
Important facts for investors to verify
- Whether record orders and backlog convert to sales and cash, particularly amid component shortages and logistics constraints.
- Acquisition integration, returns on the $1.96 billion 2021 acquisition spend, and whether acquired businesses deliver expected growth and margins.
- Working-capital trends, cash generation, liquidity and the effect of higher net debt following acquisitions.
- Underlying earnings comparisons after accounting for the 2020 Reading sale gain and realignment charges.
- Valuation assumptions for acquired intangibles and goodwill; the auditor identified Abaco acquisition accounting and indefinite-lived intangible impairment testing as critical audit matters. Internal-control assessments excluded four acquired businesses representing 17.4% of year-end assets and 6.0% of 2021 sales.