Ametek Inc.

11/03/2026 | Press release | Distributed by Public on 11/03/2026 12:49

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Recent Trends
Recent geopolitical developments, including the conflict involving Iran, have contributed to increased uncertainty in global markets. Although we have limited Middle East sales exposure and do not have material operations or assets located in the region, we are not immune to the broader macroeconomic uncertainty an extended conflict may create on the global economy.
Our businesses have been proactive in addressing the impacts of tariffs, including targeted pricing initiatives, strategic adjustments to our global supply chains, and leveraging our worldwide manufacturing footprint to localize production and adapt to changing demand patterns. While recent tariff-related changes did not have a material impact on our results of operations for the nine months ended September 30, 2026, as the situation continues to evolve, we cannot be certain of the outcome, which could adversely impact demand for our products, costs, inflationary pressures, customers, suppliers, and the overall global economy. We continue to monitor and analyze the impacts of the tariffs and the evolving macroeconomic environment and will continue to implement appropriate actions as necessary to mitigate their effects on our businesses.
Results of Operations
For the quarter ended September 30, 2026, the Company delivered record sales, operating income, net income, and diluted EPS, supported by strong operating margins. Contributions from the acquisitions of FARO Technologies ("FARO") in July 2025, LKC Technologies ("LKC") in January 2026, First Aviation Services ("First Aviation") in May 2026, and Indicor Instrumentation ("Indicor") in August 2026 (collectively, the "recent acquisitions"), together with the Company's Operational Excellence initiatives, contributed favorably to the Company's third-quarter 2026 results. In the third quarter of 2026, the Company recorded $27.8 million of pre-tax acquisition-related costs associated with the Indicor acquisition, which are comprised of one-time transaction costs and ongoing integration costs. Integration costs of $9.8 million are recorded in Cost of sales and primarily include fair-value inventory adjustments. Transaction costs of $18.1 million are recorded in Other (expense) income, net and primarily include representation and warranty insurance costs.
Results of operations for the third quarter of 2026 compared with the third quarter of 2025
Net sales for the third quarter of 2026 were a record $2,220.3 million, an increase of $327.7 million or 17.3%, compared with net sales of $1,892.6 million for the third quarter of 2025. The increase in net sales for the third quarter of 2026 was due to a 10% increase in organic sales, as well as a 7% increase from acquisitions.
Total international sales for the third quarter of 2026 were $1,060.9 million or 47.8% of net sales, an increase of $154.8 million or 17.1%, compared with international sales of $906.1 million or 47.9% of net sales for the third quarter of 2025. The increase in international sales was primarily driven by higher demand in Asia, as well as contributions from recent acquisitions.
Orders for the third quarter of 2026 were a record $2,650.6 million, an increase of $682.8 million or 34.7%, compared with $1,967.8 million for the third quarter of 2025. The increase in orders for the third quarter of 2026 was due to a 17% increase in organic orders and an 18% increase from acquisitions. The Company's backlog of unfilled orders at September 30, 2026 was a record $4,540.5 million, an increase of $959.0 million or 26.8% compared with $3,581.5 million at December 31, 2025.
Cost of sales for the third quarter of 2026 was $1,409.9 million or 63.5% of net sales, an increase of $203.4 million or 16.9%, compared with $1,206.5 million or 63.7% of net sales for the third quarter of 2025. The cost of sales increase was primarily due to the net sales increase discussed above, partially offset by continued benefits from the Company's Operational Excellence initiatives.
Segment operating income for the third quarter of 2026 was $616.8 million, an increase of $100.5 million or 19.5%, compared with segment operating income of $516.3 million for the third quarter of 2025. Segment operating margins, as a percentage of net sales, increased to 27.8% for the third quarter of 2026, compared with 27.3% for the third quarter of 2025. Operating income and operating margins for the third quarter of 2026 included $9.8 million of acquisition-related integration costs related to the Indicor acquisition, which negatively impacted operating margins by 40 basis points. In the third quarter of 2026, segment operating margins were negatively impacted 40 basis points by the dilutive impact of recent acquisitions. Excluding the dilutive impact of recent acquisitions and acquisition-related costs, segment operating margins increased 130 basis points compared to the third quarter of 2025 due to the sales increase discussed above, as well as continued benefits from the Company's Operational Excellence initiatives.
Selling, general and administrative expenses for the third quarter of 2026 were $225.5 million or 10.2% of net sales, an increase of $27.7 million or 14.0%, compared with $197.8 million or 10.4% of net sales for the third quarter of 2025. Selling expenses increased primarily due to the net sales increase discussed above. General and administrative expenses for the third quarter of 2026 were $31.8 million, compared with $27.9 million for the third quarter of 2025.
Consolidated operating income was a record $584.9 million or 26.3% of net sales for the third quarter of 2026, an increase of $96.5 million or 19.8%, compared with $488.4 million or 25.8% of net sales for the third quarter of 2025.
Interest expense for the third quarter of 2026 was $39.8 million, an increase of $17.3 million or 76.9%, compared with $22.5 million for the third quarter of 2025. Interest expense increased in the third quarter of 2026 primarily due to higher interest associated with the revolving credit and term loan borrowings in connection with the Indicor acquisition. See Note 12 for additional information.
Other expense, net was $23.2 million for the third quarter of 2026, compared with $17.9 million for the third quarter of 2025. Other expense, net in the third quarter of 2026 includes $18.1 million of acquisition-related costs, primarily representation and warranty insurance costs. Other expense, net in the third quarter of 2025 included $12.0 million of acquisition-related costs, primarily investment banker fees.
The effective tax rate for the third quarter of 2026 was 18.3%, compared with 17.1% for the third quarter of 2025. The
lower effective tax rate in the third quarter of 2025 primarily reflects the remeasurement of deferred tax liabilities following the
enactment of a lower corporate tax rate in Germany.
Net income for the third quarter of 2026 was a record $426.3 million, an increase of $54.9 million or 14.8%, compared with $371.4 million for the third quarter of 2025.
Diluted earnings per share for the third quarter of 2026 were a record $1.85, an increase of $0.25 or 15.6%, compared with $1.60 per diluted share for the third quarter of 2025.
Segment Results
EIG's net sales were a record $1,442.3 million for the third quarter of 2026, an increase of $196.0 million or 15.7%, compared with $1,246.3 million for the third quarter of 2025. The net sales increase was due to a 9% organic sales increase as well as a 7% increase from recent acquisitions.
EIG's operating income was a record $406.7 million for the third quarter of 2026, an increase of $54.3 million or 15.4%, compared with $352.4 million for the third quarter of 2025. EIG's operating margins were 28.2% of net sales for the third quarter of 2026, compared with 28.3% for the third quarter of 2025. EIG's operating income and operating margins for the third quarter of 2026 included $7.8 million of acquisition-related integration costs related to the Indicor acquisition, which negatively impacted EIG's operating margins by 50 basis points. EIG's operating margins were negatively impacted 60 basis points in the third quarter of 2026 by the dilutive impact of recent acquisitions. Excluding the dilutive impact of recent acquisitions and acquisition-related costs, EIG's operating margins increased 100 basis points compared to the third quarter of 2025 due to the sales increase discussed above, as well as continued benefits from the Company's Operational Excellence initiatives.
EMG's net sales totaled a record $778.0 million for the third quarter of 2026, an increase of $131.7 million or 20.4%, compared with $646.3 million for the third quarter of 2025. The net sales increase was due to a 13% organic sales increase as well as a 7% increase from recent acquisitions.
EMG's operating income was a record $210.0 million for the third quarter of 2026, an increase of $46.1 million or 28.2%, compared with $163.9 million for the third quarter of 2025. EMG's operating margins were 27.0% of net sales for the third quarter of 2026, compared with 25.4% for the third quarter of 2025. EMG's operating income and operating margins for the third quarter of 2026 included $2.0 million of acquisition-related integration costs related to the Indicor acquisition, which negatively impacted operating margins by 20 basis points. EMG's operating margins were negatively impacted by 10 basis points in the third quarter of 2026 by the dilutive impact of recent acquisitions. Excluding the dilutive impact of recent acquisitions and acquisition-related costs, EMG's operating margins increased 190 basis points compared to the third quarter of 2025 due to the sales increase discussed above, as well as continued benefits from the Company's Operational Excellence initiatives.
Results of operations for the first nine months of 2026 compared with the first nine months of 2025
Net sales for the first nine months of 2026 were $6,193.1 million, an increase of $790.4 million or 14.6%, compared with net sales of $5,402.7 million for the first nine months of 2025. The increase in net sales for the first nine months of 2026 was due to an 8% organic sales increase, 6% increase from acquisitions, as well as a 1% favorable effect of foreign currency translation.
Total international sales for the first nine months of 2026 were $2,948.2 million or 47.6% of net sales, an increase of $394.6 million or 15.5%, compared with international sales of $2,553.6 million or 47.3% of net sales for the first nine months of 2025. The increase in international sales was primarily driven by increased demand in Asia and Europe, as well as contributions from recent acquisitions.
Orders for the first nine months of 2026 were $7,152.1 million, an increase of $1,606.4 million or 29.0%, compared with $5,545.7 million for the first nine months of 2025. The increase in orders for the first nine months of 2026 was due to a 21% organic order increase, a 9% increase from acquisitions, partially offset by a 1% unfavorable effect of foreign currency translation.
Cost of sales for the first nine months of 2026 was $3,930.1 million or 63.5% of net sales, an increase of $474.5 million or 13.7%, compared with $3,455.6 million or 64.0% of net sales for the first nine months of 2025. The cost of sales increase was primarily due to the net sales increase discussed above, partially offset by continued benefits from the Company's Operational Excellence initiatives.
Segment operating income for the first nine months of 2026 was $1,720.5 million, an increase of $233.1 million or 15.7%, compared with segment operating income of $1,487.4 million for the first nine months of 2025. Segment operating margins, as a percentage of net sales, increased to 27.8% for the first nine months of 2026, compared with 27.5% for the first nine months of 2025. Operating income and operating margins for the first nine months of 2026 included $27.6 million of acquisition-related integration costs related to recent acquisitions, which negatively impacted operating margins by 40 basis points. Segment operating margins were negatively impacted 70 basis points in the first nine months of 2026 by the dilutive impact of recent acquisitions. Excluding the dilutive impact of the recent acquisitions and acquisition-related costs, segment operating margins increased 140 basis points compared to the first nine months of 2025, due to the sales increase discussed above, as well as continued benefits from the Company's Operational Excellence initiatives.
Selling, general and administrative expenses for the first nine months of 2026 were $635.0 million or 10.3% of net sales, an increase of $92.8 million or 17.1%, compared with $542.2 million or 10.0% of net sales for the first nine months of 2025. Selling expenses increased primarily due to the net sales increase discussed above, as well as higher selling expense related to recent acquisitions. General and administrative expenses for the first nine months of 2026 were $92.4 million, compared with $82.6 million for the first nine months of 2025.
Consolidated operating income was $1,628.1 million or 26.3% of net sales for the first nine months of 2026, an increase of $223.3 million or 15.9%, compared with $1,404.8 million or 26.0% of net sales for the first nine months of 2025.
Interest expense for the first nine months of 2026 was $90.8 million, an increase of $32.4 million or 55.6%, compared with $58.4 million for the first nine months of 2025. Interest expense for the first nine months of 2026 includes $10.0 million of fees related to bridge loan financing entered into in connection with the definitive agreement to acquire Indicor. The bridge loan was terminated in June 2026 following the execution of the Revolving Credit Agreement and the Term Loan Agreement. The remaining increase for the first nine months of 2026 was primarily due to higher interest associated with the revolving credit and term loan borrowings in connection with the Indicor acquisition. See Note 12 for additional information.
Other expense, net was $30.0 million for the first nine months of 2026, compared with $22.1 million of other expense, net for the first nine months of 2025. Other expense, net in the first nine months of 2026 included $18.1 million of acquisition-related costs, primarily representation and warranty insurance costs associated with the Indicor acquisition. Other expense, net in the first nine months of 2025 included $12.0 million of acquisition-related costs, primarily investment banking fees.
The effective tax rate for the first nine months of 2026 was 18.2%, compared with 18.3% for the first nine months of 2025.
Net income for the first nine months of 2026 was $1,232.6 million, an increase of $151.1 million or 14.0%, compared with $1,081.5 million for the first nine months of 2025.
Diluted earnings per share for the first nine months of 2026 were $5.36, an increase of $0.69 or 14.8%, compared with $4.67 per diluted share for the first nine months of 2025.
Segment Results
EIG's net sales totaled $4,028.0 million for the first nine months of 2026, an increase of $478.4 million or 13.5%, compared with $3,549.6 million for the first nine months of 2025. The net sales increase was due to a 7% increase from acquisitions, as well as a 6% increase in organic sales.
EIG's operating income was $1,150.4 million for the first nine months of 2026, an increase of $99.5 million or 9.5%, compared with $1,050.9 million for the first nine months of 2025. EIG's operating margins were 28.6% of net sales for the first nine months of 2026, compared with 29.6% for the first nine months of 2025. EIG's operating income and operating margins for the first nine months of 2026 included $24.4 million of acquisition-related integration costs related to the Indicor, FARO and LKC acquisitions, which negatively impacted EIG's operating margins by 60 basis points. EIG's operating margins were negatively impacted 100 basis points in the first nine months of 2026 by the dilutive impact of recent acquisitions. Excluding the dilutive impact of recent acquisitions and acquisition-related costs, EIG's operating margins increased 60 basis points in the first nine months of 2026 compared to the first nine months of 2025 due to the sales increase discussed above, as well as continued benefits from the Company's Operational Excellence initiatives.
EMG's net sales totaled $2,165.1 million for the first nine months of 2026, an increase of $312.0 million or 16.8%, compared with $1,853.1 million for the first nine months of 2025. The net sales increase was due to a 13% increase in organic sales, a 3% increase from acquisitions, as well as a 1% favorable effect of foreign currency translation.
EMG's operating income was $570.1 million for the first nine months of 2026, an increase of $133.6 million or 30.6%, compared with $436.5 million for the first nine months of 2025. EMG's operating margins were 26.3% of net sales for the first nine months of 2026, compared with 23.6% for the first nine months of 2025. EMG's operating income and operating margins for the first nine months of 2026 included $3.2 million of acquisition-related integration costs related to the Indicor acquisition, which negatively impacted EMG's operating margins by 20 basis points. Excluding the acquisition-related costs, EMG's operating margins increased 290 basis points compared to the first nine months of 2025, due to the sales increase 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 $1,495.9 million for the first nine months of 2026, an increase of $278.4 million or 22.9%, compared with $1,217.5 million for the first nine months of 2025. The increase in cash provided by operating activities for the first nine months of 2026 was primarily due to higher net income, as well as lower working capital requirements.
Free cash flow (cash flow provided by operating activities less capital expenditures) was $1,405.2 million for the first nine months of 2026, compared with $1,144.2 million for the first nine months of 2025. EBITDA (earnings before interest, income taxes, depreciation and amortization) was $1,921.7 million for the first nine months of 2026, compared with $1,696.0 million for the first nine months of 2025. 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 $5,436.1 million for the first nine months of 2026, compared with cash used by investing activities of $1,005.8 million for the first nine months of 2025. For the first nine months of 2026, the Company paid $5,345.8 million, net of cash acquired, to purchase LKC Technologies in January 2026, First Aviation Services, Inc. in May 2026, and Indicor in August 2026. For the first nine months of 2025, the Company paid $933.2 million, net of cash acquired, to purchase Kern Microtechnik and FARO. Additions to property, plant and equipment totaled $90.7 million for the first nine months of 2026, compared with $73.3 million for the first nine months of 2025.
Cash provided by financing activities totaled $4,158.0 million for the first nine months of 2026, compared with cash used by financing activities of $176.7 million for the first nine months of 2025. At September 30, 2026, total debt, net was $6,669.4 million, compared with $2,283.3 million at December 31, 2025. For the first nine months of 2026, total borrowings increased by $4,428.0 million compared with a $187.7 million increase for the first nine months of 2025.
On June 9, 2026, the Company along with certain of its foreign subsidiaries entered into an amended and restated revolving credit agreement (the "Revolving Credit Agreement") and a separate term loan credit agreement (the "Term Loan
Agreement"). The Revolving Credit Agreement increased the aggregate commitments from $2.3 billion to $3.5 billion and extended the maturity to June 9, 2031. The facility is subject to customary financial and restrictive covenants and may be used for general corporate purposes, including working capital, debt refinancing, and up to $1.0 billion to fund a portion of the consideration for the Indicor acquisition. At September 30, 2026, the Company had available borrowing capacity of $2,168.1 million under its revolving credit facility.
The Term Loan Agreement provides for a senior unsecured term loan facility of up to $4.0 billion, consisting of three tranches: $1.625 billion maturing three years after funding, $1.625 billion maturing four years after funding, and $750 million maturing five years after funding. At September 30, 2026, the Company had $4.0 billion borrowings outstanding under the term loans.
The debt-to-capital ratio was 36.3% at September 30, 2026, compared with 17.7% at December 31, 2025. 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 33.9% at September 30, 2026, compared with 14.7% at December 31, 2025. 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 2026 included cash dividends paid of $233.5 million, compared with $214.4 million for the first nine months of 2025. Effective February 12, 2026, the Company's Board of Directors approved a 10% increase in the quarterly cash dividend on the Company's common stock to $0.34 per common share from $0.31 per common share. The Company used $28.2 million to repurchase its common stock for the first nine months of 2026, compared with $163.6 million for the first nine months of 2025. Proceeds from stock option exercises were $28.1 million for the first nine months of 2026, compared with $21.6 million for the first nine months of 2025.
As a result of all of the Company's cash flow activities for the first nine months of 2026, cash and cash equivalents at September 30, 2026 totaled $666.2 million, compared with $458.0 million at December 31, 2025. At September 30, 2026, the Company had $482.4 million in cash outside the United States, compared with $374.5 million at December 31, 2025. 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.
Non-GAAP Financial Measures
EBITDA represents earnings before interest, income taxes, depreciation and amortization. EBITDA is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. It should not be considered, however, as an alternative to operating income as an indicator of the Company's operating performance or as an alternative to cash flows as a measure of the Company's overall liquidity as presented in the Company's consolidated financial statements. Furthermore, EBITDA measures shown for the Company may not be comparable to similarly titled measures used by other companies. The following table presents the reconciliation of net income reported in accordance with U.S. generally accepted accounting principles ("GAAP") to EBITDA:
Nine Months Ended September 30,
2026 2025
(In millions)
Net income $ 1,232.6 $ 1,081.5
Add (deduct):
Interest expense 90.8 58.4
Interest income (3.5) (3.8)
Income taxes 274.7 242.8
Depreciation 108.6 107.6
Amortization 218.5 209.5
Total adjustments 689.1 614.5
EBITDA $ 1,921.7 $ 1,696.0
Free cash flow represents cash flow from operating activities less capital expenditures. Free cash flow is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. The following table presents the reconciliation of cash flow from operating activities reported in accordance with U.S. GAAP to free cash flow:
Nine Months Ended September 30,
2026 2025
(In millions)
Cash provided by operating activities $ 1,495.9 $ 1,217.5
Deduct: Capital expenditures (90.7) (73.3)
Free cash flow $ 1,405.2 $ 1,144.2
Net debt represents total debt, net minus cash and cash equivalents. Net debt is presented because the Company is aware that it is used by rating agencies, securities analysts, investors and other parties in evaluating the Company. The following table presents the reconciliation of total debt, net reported in accordance with U.S. GAAP to net debt:
September 30, December 31,
2026 2025
(In millions)
Total debt, net $ 6,669.4 $ 2,283.3
Less: Cash and cash equivalents (666.2) (458.0)
Net debt 6,003.2 1,825.3
Stockholders' equity 11,696.2 10,628.8
Capitalization (net debt plus stockholders' equity) $ 17,699.4 $ 12,454.1
Net debt as a percentage of capitalization 33.9 % 14.7 %
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, 2025. 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, constitutes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements reflect management's current expectations, estimates and projections regarding future events and are subject to known and unknown risks, uncertainties, and other factors that may cause actual results and outcomes to differ materially from expectations. These factors and uncertainties include, among others, 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; tariffs, trade disputes, foreign currency fluctuations and geopolitical developments; the Company's ability to successfully develop new products, open new facilities or transfer product lines; the price and availability of raw materials; cybersecurity and information technology risks; compliance with government regulations, including environmental regulations; changes in the competitive environment; 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 Forms 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.
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