filings.toolsAmetek 10-Q 2022-09-30
Filed 2022-11-01. 5 sections, 106K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
_________________________
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-12981
_________________________
AMETEK, Inc.
(Exact name of registrant as specified in its charter)
_________________________
Delaware
(State or other jurisdiction of
incorporation or organization)
1100 Cassatt Road
Berwyn, Pennsylvania
(Address of principal executive offices)
14-1682544
(I.R.S. Employer
Identification No.)
19312-1177
(Zip Code)
Registrant’s telephone number, including area code: (610) 647-2121
_________________________
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. Yes ☒ 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). Yes ☒ 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.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||
| Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☐ | ||||||||
| Emerging growth company | ☐ |
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 ☐ 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 | ||||||||||||
| Common Stock | AME | New 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 28, 2022 was 229,654,397 shares.
AMETEK, Inc.
Form 10-Q
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMETEK, Inc.
Consolidated Statement of Income
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net sales | $ | 1,551,786 | $ | 1,440,681 | $ | 4,524,863 | $ | 4,042,769 | |||||||||||||||
| Cost of sales | 1,004,596 | 949,402 | 2,941,604 | 2,651,506 | |||||||||||||||||||
| Selling, general and administrative | 162,670 | 153,716 | 480,657 | 443,744 | |||||||||||||||||||
| Total operating expenses | 1,167,266 | 1,103,118 | 3,422,261 | 3,095,250 | |||||||||||||||||||
| Operating income | 384,520 | 337,563 | 1,102,602 | 947,519 | |||||||||||||||||||
| Interest expense | (20,245) | (20,476) | (60,165) | (59,865) | |||||||||||||||||||
| Other income (expense), net | 3,227 | 2,581 | 7,752 | (3,775) | |||||||||||||||||||
| Income before income taxes | 367,502 | 319,668 | 1,050,189 | 883,879 | |||||||||||||||||||
| Provision for income taxes | 69,861 | 62,208 | 197,728 | 175,507 | |||||||||||||||||||
| Net income | $ | 297,641 | $ | 257,460 | $ | 852,461 | $ | 708,372 | |||||||||||||||
| Basic earnings per share | $ | 1.30 | $ | 1.11 | $ | 3.70 | $ | 3.07 | |||||||||||||||
| Diluted earnings per share | $ | 1.29 | $ | 1.10 | $ | 3.68 | $ | 3.04 | |||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic shares | 229,500 | 231,171 | 230,360 | 230,811 | |||||||||||||||||||
| Diluted shares | 230,714 | 233,000 | 231,675 | 232,712 | |||||||||||||||||||
| Dividends declared and paid per share | $ | 0.22 | $ | 0.20 | $ | 0.66 | $ | 0.60 |
See accompanying notes.
AMETEK, Inc.
Condensed Consolidated Statement of Comprehensive Income
(In thousands)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Total comprehensive income | $ | 215,568 | $ | 240,076 | $ | 694,902 | $ | 688,575 |
See accompanying notes.
AMETEK, Inc.
Consolidated Balance Sheet
(In thousands)
| September 30, 2022 | December 31, 2021 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 309,944 | $ | 346,772 | |||||||
| Receivables, net | 876,460 | 829,213 | |||||||||
| Inventories, net | 1,025,130 | 769,175 | |||||||||
| Other current assets | 221,034 | 183,605 | |||||||||
| Total current assets | 2,432,568 | 2,128,765 | |||||||||
| Property, plant and equipment, net | 594,926 | 617,138 | |||||||||
| Right of use assets, net | 161,217 | 169,924 | |||||||||
| Goodwill | 5,190,196 | 5,238,726 | |||||||||
| Other intangibles, net | 3,254,243 | 3,368,629 | |||||||||
| Investments and other assets | 405,782 | 375,005 | |||||||||
| Total assets | $ | 12,038,932 | $ | 11,898,187 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Short-term borrowings and current portion of long-term debt, net | $ | 272,027 | $ | 315,093 | |||||||
| Accounts payable | 524,255 | 470,252 | |||||||||
| Customer advanced payments | 332,244 | 298,728 | |||||||||
| Income taxes payable | 49,056 | 35,904 | |||||||||
| Accrued liabilities and other | 413,801 | 443,337 | |||||||||
| Total current liabilities | 1,591,383 | 1,563,314 | |||||||||
| Long-term debt, net | 2,085,364 | 2,229,148 | |||||||||
| Deferred income taxes | 696,091 | 719,675 | |||||||||
| Other long-term liabilities | 533,422 | 514,166 | |||||||||
| Total liabilities | 4,906,260 | 5,026,303 | |||||||||
| Stockholders’ equity: | |||||||||||
| Common stock | 2,695 | 2,689 | |||||||||
| Capital in excess of par value | 1,059,079 | 1,012,526 | |||||||||
| Retained earnings | 8,600,938 | 7,900,113 | |||||||||
| Accumulated other comprehensive loss | (628,003) | (470,444) | |||||||||
| Treasury stock | (1,902,037) | (1,573,000) | |||||||||
| Total stockholders’ equity | 7,132,672 | 6,871,884 | |||||||||
| Total liabilities and stockholders’ equity | $ | 12,038,932 | $ | 11,898,187 |
See accompanying notes.
AMETEK, Inc.
Consolidated Statement of Stockholders’ Equity
(In thousands)
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Capital stock | |||||||||||||||||||||||
| Common stock, $0.01 par value | |||||||||||||||||||||||
| Balance at the beginning of the period | $ | 2,695 | $ | 2,684 | $ | 2,689 | $ | 2,676 | |||||||||||||||
| Shares issued | — | 2 | 6 | 10 | |||||||||||||||||||
| Balance at the end of the period | 2,695 | 2,686 | 2,695 | 2,686 | |||||||||||||||||||
| Capital in excess of par value | |||||||||||||||||||||||
| Balance at the beginning of the period | 1,040,951 | 964,791 | 1,012,526 | 921,752 | |||||||||||||||||||
| Issuance of co |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
The following table sets forth net sales and income by reportable segment and on a consolidated basis:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||
| Electronic Instruments | $ | 1,054,124 | $ | 981,815 | $ | 3,070,131 | $ | 2,706,673 | |||||||||||||||
| Electromechanical | 497,662 | 458,866 | 1,454,732 | 1,336,096 | |||||||||||||||||||
| Consolidated net sales | $ | 1,551,786 | $ | 1,440,681 | $ | 4,524,863 | $ | 4,042,769 | |||||||||||||||
| Operating income and income before income taxes: | |||||||||||||||||||||||
| Segment operating income: | |||||||||||||||||||||||
| Electronic Instruments | $ | 272,714 | $ | 245,118 | $ | 782,603 | $ | 678,652 | |||||||||||||||
| Electromechanical | 136,467 | 114,571 | 389,047 | 332,038 | |||||||||||||||||||
| Total segment operating income | 409,181 | 359,689 | 1,171,650 | 1,010,690 | |||||||||||||||||||
| Corporate administrative expenses | (24,661) | (22,126) | (69,048) | (63,171) | |||||||||||||||||||
| Consolidated operating income | 384,520 | 337,563 | 1,102,602 | 947,519 | |||||||||||||||||||
| Interest expense | (20,245) | (20,476) | (60,165) | (59,865) | |||||||||||||||||||
| Other income (expense), net | 3,227 | 2,581 | 7,752 | (3,775) | |||||||||||||||||||
| Consolidated income before income taxes | $ | 367,502 | $ | 319,668 | $ | 1,050,189 | $ | 883,879 |
Recent Events and Market Conditions
Recent events and market conditions impacting our business include the inflationary cost environment, rising interest rates, supply chain constraints, the COVID-19 pandemic, and the ongoing conflict in Ukraine. As a result of these events and conditions, we anticipate a challenging global economic environment for the remainder of 2022 and into 2023.
Beginning in 2021, we experienced heightened levels of inflation in material and transportation costs. We have taken steps to mitigate the impacts of material and transportation cost inflation by implementing pricing actions. We experienced additional pressure in our supply chain due to component shortages and strained transportation capacity, as well as the impact of continued elevated customer demand. In response to these supply chain pressures, we have taken actions to build inventory and seek alternative sources of supply to support sales and backlog growth. The inflationary environment has also resulted in central banks raising short-term interest rates. We expect inflation to continue into 2023 and will continue to take actions to mitigate this inflationary pressure.
There still remains uncertainty around the COVID-19 pandemic, its effect on labor, government mandated lockdowns and other restrictive measures, and the pandemic's ultimate duration. Lockdowns in China during the first half of 2022 limited our ability to access customer sites, operate certain facilities, and placed additional constraints on our supply chain. Depending on the course of the pandemic, additional lockdowns in China or elsewhere could impact our operations and results of operations.
The invasion of Ukraine by Russia and the sanctions imposed in response to this conflict have increased global economic and political uncertainty. Russia and Ukraine represent an insignificant portion of our business, but a significant expansion of the conflict's current scope could further complicate the economic environment.
While the ultimate impact of these events remains uncertain, we will continue to evaluate the extent to which these factors will impact our business, financial condition, and results of operations.
Results of operations for the third quarter of 2022 compared with the third quarter of 2021
For the quarter ended September 30, 2022, the Company posted record sales, operating income, and backlog as well as strong orders. The Company achieved these results from organic sales growth in both EIG and EMG, as well as the Company's Operational Excellence initiatives.
Net sales for the third quarter of 2022 were a record $1,551.8 million, an increase of $111.1 million or 7.7%, compared with net sales of $1,440.7 million for the third quarter of 2021. The increase in net sales for the third quarter of 2022 was due to an 11% increase in organic sales and a 1% increase from acquisitions, partially offset by an unfavorable 4% effect of foreign currency translation.
Total international sales for the third quarter of 2022 were $733.0 million or 47.2% of net sales, an increase of $31.9 million or 4.5%, compared with international sales of $701.1 million or 48.7% of net sales for the third quarter of 2021. The increase in international sales was primarily driven by strong demand in Asia during the quarter as well as contributions from recent acquisitions.
Orders for the third quarter of 2022 were $1,657.9 million, a increase of $105.3 million or 6.8%, compared with $1,552.6 million for the third quarter of 2021. The increase in orders for the third quarter of 2022 was due to a 9% increase in organic orders and a 3% increase from acquisitions, partially offset by an unfavorable 5% effect of foreign currency translation. As a result, the Company's backlog of unfilled orders at September 30, 2022 was a record $3,210.5 million, an increase of $480.4 million or 17.6% compared with $2,730.1 million at December 31, 2021.
Segment operating income for the third quarter of 2022 was $409.2 million, an increase of $49.5 million or 13.8%, compared with segment operating income of $359.7 million for the third quarter of 2021. Segment operating margins, as a percentage of net sales, increased to 26.4% for the third quarter of 2022, compared with 25.0% for the third quarter of 2021. Segment operating income and operating margins were positively impacted in 2022 by the increase in sales discussed above including pricing actions in the third quarter of 2022 to offset the impact of higher material and transportation costs. Segment operating income and margins also increased due to continued benefits from the Company's Operational Excellence initiatives.
Cost of sales for the third quarter of 2022 was $1,004.6 million or 64.7% of net sales, an increase of $55.2 million or 5.8%, compared with $949.4 million or 65.9% of net sales for the third quarter of 2021. 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 2022 were $162.7 million or 10.5% of net sales, an increase of $9.0 million or 5.8%, compared with $153.7 million or 10.7% of net sales for the third quarter of 2021.
Consolidated operating income was a record $384.5 million or 24.8% of net sales for the third quarter of 2022, an increase of $46.9 million or 13.9%, compared with $337.6 million or 23.4% of net sales for the third quarter of 2021.
Other income, net was $3.2 million for the third quarter of 2022, compared with $2.6 million of other income, net for the third quarter of 2021, an increase of $0.6 million. The third quarter of 2022 includes higher pension income of $2.4 million partially offset by higher due diligence expense compared to the third quarter of 2021.
The effective tax rate for the third quarter of 2022 was 19.0%, compared with 19.5% for the third quarter of 2021. The lower effective tax rate in the third quarter of 2022 is primarily due to a favorable foreign rate differential and favorable foreign deferred taxes.
Net income for the third quarter of 2022 was $297.6 million, an increase of $40.1 million or 15.6%, compared with $257.5 million for the third quarter of 2021.
Diluted earnings per share for the third quarter of 2022 were $1.29, an increase of $0.19 or 17.3%, compared with $1.10 per diluted share for the third quarter of 2021.
Segment Results
EIG**’**s net sales totaled $1,054.1 million for the third quarter of 2022, an increase of $72.3 million or 7.4%, compared with $981.8 million for the third quarter of 2021. The net sales increase was due to a 10% increase in organic sales and a 1% increase from acquisitions, partially offset by an unfavorable 3% effect of foreign currency translation.
EIG’s operating income was $272.7 million for the third quarter of 2022, an increase of $27.6 million or 11.3%, compared with $245.1 million for the third quarter of 2021. EIG’s operating margins were 25.9% of net sales for the third quarter of 2022, compared with 25.0% for the third quarter of 2021. EIG operating income and margins increased compared to the third quarter of 2021 due to the increase in net sales and pricing actions discussed above as well as continued benefits from the Company's Operational Excellence initiatives.
EMG’s net sales totaled a record $497.7 million for the third quarter of 2022, an increase of $38.8 million or 8.5%, compared with $458.9 million for the third quarter of 2021. The net sales increase was due to an 13% organic sales increase, partially offset by an unfavorable 4% effect of foreign currency translation.
EMG’s operating income was a record $136.5 million for the third quarter of 2022, an increase of $21.9 million or 19.1%, compared with $114.6 million for the third quarter of 2021. EMG’s operating margins were a record 27.4% of net sales for the third quarter of 2022, compared with 25.0% for the third quarter of 2021. EMG operating income and margins increased compared to the third quarter of 2021 due to the increase in net sales and pricing actions discussed above as well as continued benefits from the Company's Operational Excellence initiatives.
Results of operations for the first nine months of 2022 compared with the first nine months of 2021
Net sales for the first nine months of 2022 were $4,524.9 million, an increase of $482.1 million or 11.9%, compared with net sales of $4,042.8 million for the first nine months of 2021. The increase in net sales for the first nine months of 2022 was due to a 12% organic sales increase and a 2% increase from acquisitions, partially offset by an unfavorable 2% effect of foreign currency translation.
Total international sales for the first nine months of 2022 were $2,198.6 million or 48.6% of net sales, an increase of $215.5 million or 10.9%, compared with international sales of $1,983.1 million or 49.1% of net sales for the first nine months of 2021. The increase in international sales was primarily driven by strong demand in all regions as well as contributions from recent acquisitions.
Orders for the first nine months of 2022 were $5,005.3 million, an increase of $141.3 million or 2.9%, compared with $4,864.0 million for the first nine months of 2021. The increase in orders for the first nine months of 2022 was due to a 12% organic order increase, partially offset by a 5% decrease from $371 million of acquired backlog from the 2021 acquisitions, as well as a 4% unfavorable effect of foreign currency translation.
Segment operating income for the first nine months of 2022 was $1,171.7 million, an increase of $161.0 million or 15.9%, compared with segment operating income of $1,010.7 million for the first nine months of 2021. During the first nine months of 2022, the Company implemented pricing actions to offset the impact of higher material and transportation costs. Segment operating income was positively impacted in 2022 by the pricing actions and increase in sales discussed above. Segment operating margins, as a percentage of net sales, increased to 25.9% for the first nine months of 2022, compared with 25.0% for the first nine months of 2021. Segment operating margins for the first nine months of 2022 were negatively impacted by the dilutive impact of the 2021 acquisitions. Excluding the dilutive impact of recent acquisitions, segment operating margins for the core businesses increased 150 basis points compared to the first nine months of 2021, due to the Company's Operational Excellence initiatives.
Cost of sales for the first nine months of 2022 was $2,941.6 million or 65.0% of net sales, an increase of $290.1 million or 10.9%, compared with $2,651.5 million or 65.6% of net sales for the first nine months of 2021. 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 2022 were $480.7 million or 10.6% of net sales, an increase of $37.0 million or 8.3%, compared with $443.7 million or 11.0% of net sales for the first nine months of 2021. Selling, general and administrative expenses increased primarily due to the net sales increase discussed above.
Consolidated operating income was $1,102.6 million or 24.4% of net sales for the first nine months of 2022, an increase of $155.1 million or 16.4%, compared with $947.5 million or 23.4% of net sales for the first nine months of 2021.
Other income, net was $7.8 million for the first nine months of 2022, compared with $3.8 million of other expense, net for the first nine months of 2021, a change of $11.6 million. The first nine months of 2022 includes higher pension income of $7.4 million and lower acquisition-related due diligence expense compared to the first nine months of 2021.
The effective tax rate for the first nine months of 2022 was 18.8%, compared with 19.9% for the first nine months of 2021. The lower effective tax rate in 2022 is primarily due to improved foreign-derived intangible income ("FDII") benefits and a favorable foreign tax rate differential.
Net income for the first nine months of 2022 was $852.5 million, an increase of $144.1 million or 20.3%, compared with $708.4 million for the first nine months of 2021.
Diluted earnings per share for the first nine months of 2022 were $3.68, an increase of $0.64 or 21.1%, compared with $3.04 per diluted share for the first nine months of 2021.
Segment Results
**EIG’**s net sales totaled $3,070.1 million for the first nine months of 2022, an increase of $363.4 million or 13.4%, compared with $2,706.7 million for the first nine months of 2021. The net sales increase was due to a 12% organic sales increase and a 3% increase from acquisitions, partially offset by an unfavorable 2% effect of foreign currency translation.
EIG’s operating income was $782.6 million for the first nine months of 2022, an increase of $103.9 million or 15.3%, compared with $678.7 million for the first nine months of 2021. EIG’s operating margins were 25.5% of net sales for the first nine months of 2022, compared with 25.1% for the first nine months of 2021. EIG's operating margins in the first nine months of 2022 were negatively impacted by the dilutive impact of the 2021 acquisitions. Excluding the dilutive impact of the 2021 acquisitions, EIG operating margins increased 130 basis points compared to the first nine months of 2021, due to the pricing actions and increase in net sales discussed above, as well as continued benefits from the Company's Operational Excellence initiatives.
EMG’s net sales totaled $1,454.7 million for the first nine months of 2022, an increase of $118.6 million or 8.9%, compared with $1,336.1 million for the first nine months of 2021. The net sales increase was due to a 12% organic sales increase, partially offset by an unfavorable 3% effect of foreign currency translation.
EMG’s operating income was $389.0 million for the first nine months of 2022, an increase of $57.0 million or 17.2%, compared with $332.0 million for the first nine months of 2021. EMG's operating income included a $7.1 million gain on the sale of a facility during the first nine months of 2022. EMG’s operating margins were 26.7% of net sales for the first nine months of 2022, compared with 24.9% for the first nine months of 2021. Excluding the gain on the sale of a facility, EMG operating margins increased 140 basis points compared to the first nine months of 2021, due to the pricing actions and increase in net sales discussed above, as well as continued benefits from the Company's Operational Excellence initiatives.
Financial Condition
Liquidity and Capital Resources
Cash provided by operating activities totaled $764.4 million for the first nine months of 2022, a decrease of $114.2 million or 13.0%, compared with $878.6 million for the first nine months of 2021. The decrease in cash provided by operating activities for the first nine months of 2022 was primarily due to higher investments in inventory to support sales and backlog growth, and to mitigate inventory supply chain constraints, partially offset by higher net income.
Free cash flow (cash flow provided by operating activities less capital expenditures) was $683.5 million for the first nine months of 2022, compared with $811.3 million for the first nine months of 2021. EBITDA (earnings before interest, income taxes, depreciation and amortization) was $1,340.3 million for the first nine months of 2022, compared with $1,157.2 million for the first nine months of 2021. 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 $255.5 million for the first nine months of 2022, compared with cash used by investing activities of $1,895.2 million for the first nine months of 2021. For the first nine months of 2022, the Company paid $190.3 million, net of cash acquired, to purchase Navitar, Inc. For the first nine months of 2021, the Company paid $1,839.7 million, net of cash acquired, to purchase Abaco Systems, Magnetrol International, NSI-MI Technologies, Crank Software, and EGS Automation. Additions to property, plant and equipment totaled $80.8 million for the first nine months of 2022, compared with $67.2 million for the first nine months of 2021.
Cash used by financing activities totaled $501.2 million for the first nine months of 2022, compared with cash provided by financing activities of $171.2 million for the first nine months of 2021. At September 30, 2022, total debt, net was $2,357.4 million, compared with $2,544.2 million at December 31, 2021. For the first nine months of 2022, total borrowings decreased by $26.3 million compared with a $286.1 million increase for the first nine months of 2021. At September 30, 2022, the Company had available borrowing capacity of $2,685.9 million under its revolving credit facility, including the $700 million accordion feature.
On May 12, 2022, the Company along with certain of its foreign subsidiaries amended and restated its credit agreement dated as of September 22, 2011, as amended and restated as of March 10, 2016 and as further amended and restated as of October 30, 2018, with the lenders, JPMorgan Chase Bank, N.A., as Administrative Agent and Bank of America, N.A., PNC Bank, National Association, Trust Bank and Wells Fargo Bank, National Association, as Co-Syndication Agents. The credit agreement amends and restates the Company’s existing revolving credit facility to increase the size from $1.5 billion to
$2.3 billion and terminates the $800 million term loan. The credit agreement places certain restrictions on allowable additional indebtedness. At September 30, 2022, the Company had $274.0 million outstanding on the revolver with a maturity date of May 2027.
The debt-to-capital ratio was 24.8% at September 30, 2022, compared with 27.0% at December 31, 2021. 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 22.3% at September 30, 2022, compared with 24.2% at December 31, 2021. 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 2022 included cash dividends paid of $151.6 million, compared with $138.3 million for the first nine months of 2021. Effective February 9, 2022, the Company’s Board of Directors approved a 10% increase in the quarterly cash dividend on the Company’s common stock to $0.22 per common share from $0.20 per common share. The Company repurchased $331.4 million of its common stock for the first nine months of 2022, compared with $13.1 million for the first nine months of 2021. Effective May 5, 2022, the Company's Board of Directors approved a $1 billion share repurchase authorization. This authorization replaces an earlier $500 million share repurchase authorization approved by the Board in February 2019. Proceeds from stock option exercises were $23.2 million for the first nine months of 2022, compared with $42.3 million for the first nine months of 2021.
As a result of all of the Company’s cash flow activities for the first nine months of 2022, cash and cash equivalents at September 30, 2022 totaled $309.9 million, compared with $346.8 million at December 31, 2021. At September 30, 2022, the Company had $290.7 million in cash outside the United States, compared with $334.0 million at December 31, 2021. 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.
Critical Accounting Policies
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, 2021. 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 COVID-19 pandemic and its potential impact on AMETEK’s operations, supply chain, and demand across key end markets; general economic conditions affecting the industries the Company serves; changes in the competitive environment or the effects of competition in the Company’s markets; risks associated with international sales and operations; the Company’s ability to consummate and successfully integrate future acquisitions; 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; and the ability to maintain adequate liquidity and financing sources. 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, 2022. 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, 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) Purchase of equity securities by the issuer and affiliated purchasers.
The following table reflects purchases of AMETEK, Inc. common stock by the Company during the three months ended September 30, 2022:
| Period | Total Number of Shares Purchased (1)(2) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan (2) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan | |||||||||||||||||||
| July 1, 2022 to July 31, 2022 | 354 | $ | 126.25 | 44,692 | $ | 825,299,713 | |||||||||||||||||
| August 1, 2022 to August 31, 2022 | — | — | — | 825,299,713 | |||||||||||||||||||
| September 1, 2022 to September 30, 2022 | — | — | — | 825,299,713 | |||||||||||||||||||
| Total | 354 | $ | 126.25 | 44,692 |
(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, which replaces the previous $500 million authorization for the repurchase of its common stock announced in February 2019. 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 6. Exhibits
| Exhibit Number | Description | |||||||
| 31.1* | Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
| 31.2* | Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
| 32.1* | Certification of Chief Executive Officer, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
| 32.2* | Certification of Chief Financial Officer, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
| 101.INS* | XBRL Instance Document. | |||||||
| 101.SCH* | XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101). |
- Filed electronically herewith.
SIGNATURES
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.
| AMETEK, Inc. | ||||||||
| By: | /s/ THOMAS M. MONTGOMERY | |||||||
| Thomas M. Montgomery | ||||||||
| Senior Vice President – Comptroller | ||||||||
| (Principal Accounting Officer) | ||||||||
| November 1, 2022 |