David A. Zapico
Chairman of the Board and Chief Executive Officer at AMETEK
Thank you, Kevin. And good morning everyone. AMETEK delivered excellent results in the third quarter, highlighted by outstanding operational execution, superb margin expansion, strong cash flows, and earnings ahead of our expectations.
In the quarter, we established records for operating income, operating margins, earnings per share, EBITDA and cash flows. Given these strong results and our outlook for the balance of the year, we have again increased our earnings guidance for the full year.
We have also been very active on the acquisition front. During the third quarter, we completed the acquisition of United Electronic Industries. And subsequent to the end of the third quarter, we acquired Amplifier Research.
Today, we also announced the signing of a definitive purchase agreement to acquire Paragon Medical, a highly-attractive acquisition which broadens our exposure in the medical technology space. I will provide more details on these acquisitions shortly.
Now let me turn to our third quarter results. Third quarter sales were $1.62 billion, up 5% over the same period in 2022. Organic sales growth was flat. Acquisitions added 4 points in the quarter and foreign currency added 1 point. Book-to-bill in the quarter was 0.96.
We ended the quarter with a very strong backlog of $3.4 billion, near-record levels and down a modest 2% sequentially. Our backlog is up 5% from last year's third quarter and up 23% or $640 million from the end of 2021.
AMETEK's operating performance in the third quarter was exceptional. Operating income in the quarter was a record $438 million, a 14% increase over the third quarter of 2022. Operating margins were a record 27% in the quarter, up a sizable 220 basis-points from the prior year.
EBITDA in the quarter was also a record at $511 million, up 10% over the prior year, with EBITDA margins an impressive 31.5%. Operating cash-flow was up 45% in the quarter to a record $473 million. This outstanding performance led the record earnings of $1.64 per diluted share, up 13% versus the third quarter of 2022 and above our guidance range of $1.56 to $1.58.
Now let me provide some additional details at the operating group level. First, the Electronic Instruments Group. The Electronic Instruments Group delivered impressive operating performance with continued strong and broad-based sales growth. Sales for EIG were $1.14 billion in the quarter, up 8% from the third quarter of last year.
Organic sales were up 3.5%. Acquisitions added 3.5% and foreign currency added a point. EIG's organic sales growth remains broad-based and reflects our leading position across attractive market segments and the impact of our organic growth initiatives. Growth in the quarter was particularly strong across our aerospace and defense businesses, as well as in our Zygo, SPECTRO and CAMECA businesses.
Third quarter operating income was a record $335 million, up 23% versus the prior year, and operating margins were a record 29.5% in the quarter, up an impressive 360 basis points from the prior year. Tremendous work by our EIG businesses in the third quarter.
The Electromechanical Group also delivered solid operating performance in the quarter despite the impact of normalization of inventory levels across our OEM customer base. EMG's third quarter sales were $487 million, down 2% versus the prior year, with organic sales down 8% in the quarter. Acquisitions added 4 points and foreign currency added 2 points.
EMG's operating income in the quarter was $128 million, down 7% compared to the prior-year period, while EMG's third quarter operating margins were a very solid 26.2%.
Our performance in the third quarter, and thus far in 2023, reflects the unique value inherent in the AMETEK growth model. Our differentiated businesses are aligned with diverse and attractive growth markets, while our organic growth initiatives continued to position us for long-term sustainable growth.
Our distributed operating structure provides our businesses with the ability to execute our growth strategy and our flexibility to react quickly to changing market conditions. And our asset-light business model and strong operational execution drive outstanding cash flow generation, which we redeploy on value-enhancing acquisitions. This strong cash flow and our robust balance sheet are key differentiator for AMETEK in this higher interest rate environment.
Now, switching to our acquisition strategy. As noted, we have been very active managing a strong pipeline of acquisition opportunities. We are pleased to welcome our most recent acquisitions -- United Electronic Industries and Amplifier Research, and pleased that we have signed a definitive agreement to acquire Paragon Medical.
I will provide some more color on each of these businesses, starting with Paragon Medical. Paragon Medical is a leading manufacturer of highly-engineered medical components and instruments serving applications, including orthopedics, minimally-invasive surgery, robotic surgery and drug delivery solutions. Paragon is a broad product portfolio of single-use and implantable components, are sold to a diverse blue-chip customer base of leading medical device OEMs. Paragon is an excellent acquisition for AMETEK. It expands our presence in the medtech space and provides us with access to attractive new market segments with strong growth rates.
We are acquiring Paragon in an all-cash transaction valued at approximately $1.9 billion. Paragon has annual sales of approximately $500 million and is headquartered in Pearson, Indiana. The closing of the acquisition is subject to customary closing conditions, including applicable regulatory approvals.
Now switching to United Electronic Industries, or UEI, which we acquired in August. UEI is a leading provider of ruggedized test, measurement and simulation and control solutions. UEI's custom products cater to diverse data acquisition needs from hardware in a loop testing to aircraft simulators and automated testing systems and mission-critical applications.
With a strong presence in the defense, aerospace, nuclear power generation and semiconductor, UEI nicely complements AMETEK's power systems and instruments division, significantly expanding our data acquisition capabilities.
UEI has annual sales of approximately $35 million and is based in Norwood, Massachusetts.
Next, Amplifier Research is a leading provider of innovative RF and microwave solutions. Its equipment is used for electromagnetic compatibility testing within the defense, industrial, automotive, medical and communications sectors. Amplifier Research is an outstanding strategic acquisitions and complementary fit with our existing compliance test solutions business. Their technical capability has broadened our RF instrumentation and testing portfolio. Amplifier Research is a growing business well-positioned to benefit from the growth in demand for electric vehicle research, development and testing. Amplifier Research is based in Souderton, PA and has annual sales of approximately $60 million.
Our acquisition pipeline remains very solid. We have a strong balance sheet and significant financial capacity and look to remain active in deploying capital in the coming quarters.
AMETEK also remains committed to investing in our businesses to help position them for long-term sustainable organic growth. In 2023, we plan to invest approximately $100 million in these growth initiatives, including our new product development efforts where our businesses continue to develop highly-differentiated technologies to help solve our customers' most complex challenges.
In the quarter, our vitality index, which measures sales from products introduced over the prior two years, was a healthy 26%. As a complement to our internal new product development efforts, our ORTEC business recently acquired a small technology company, innoRIID, to help broaden their technology capabilities in the radiation detection market. innoRIID boasts cutting-edge technology expertise and an exceptional product development team, known for their innovative solutions, having developed specialized artificial intelligence algorithms for radiation detection in a range of nuclear security, research, health and medical applications.
Now turning to our outlook for the remainder of the year. With strong performance in the third quarter and a positive outlook for the remainder of the year, we are once again raising our earnings guidance. For the full year, we continue to expect overall sales to be up mid to-high single-digits. And we continue to expect organic sales to be up mid-single-digits.
Diluted earnings per share for the year are now expected to be in the range of $6.31 to $6.33, up approximately 11% compared to last year's results. This is an increase from our previous guidance range of $6.18 to $6.26 per diluted share.
For the fourth quarter, we anticipate overall sales to be up mid-single-digits, with adjusted earnings of $1.61 to $1.63 per share, up 6% to 7% versus the prior year.
In summary, AMETEK's third quarter results for 2023 were outstanding, with strong growth across our long-cycle businesses, record operating performance and strong acquisition activity. Our businesses continue to excel, driven by our differentiated technology solutions serving diverse and growing markets. Our asset-light business model and strong cash flows provide us with the flexibility to navigate challenging economic environments, while actively deploying capital to enhance shareholder value. AMETEK remains firmly positioned for long-term sustainable growth.
I will now turn it over to Bill Burke, who will cover some of the financial details of the quarter, then we'll be glad to take your questions. Bill?