Item 1. Financial Statements

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Item 1. Financial Statements

AMETEK, Inc.

Consolidated Statement of Income

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales	$	1,514,552	$	1,386,346	$	2,973,077	$	2,602,088
Cost of sales	988,175		912,712		1,937,008		1,702,104
Selling, general and administrative	161,535		157,023		317,987		290,028
Total operating expenses	1,149,710		1,069,735		2,254,995		1,992,132
Operating income	364,842		316,611		718,082		609,956
Interest expense	(20,350)		(20,442)		(39,920)		(39,389)
Other income (expense), net	1,973		(4,414)		4,525		(6,356)
Income before income taxes	346,465		291,755		682,687		564,211
Provision for income taxes	64,092		60,076		127,867		113,299
Net income	$	282,373	$	231,679	$	554,820	$	450,912
Basic earnings per share	$	1.23	$	1.00	$	2.40	$	1.96
Diluted earnings per share	$	1.22	$	1.00	$	2.39	$	1.94
Weighted average common shares outstanding:
Basic shares	230,100		230,828		230,790		230,632
Diluted shares	231,247		232,841		232,156		232,569
Dividends declared and paid per share	$	0.22	$	0.20	$	0.44	$	0.40

See accompanying notes.

AMETEK, Inc.

Condensed Consolidated Statement of Comprehensive Income

(In thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Total comprehensive income	$	222,033	$	237,673	$	479,334	$	448,499

See accompanying notes.

AMETEK, Inc.

Consolidated Balance Sheet

(In thousands)


	June 30, 2022		December 31, 2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	348,653	$	346,772
Receivables, net	885,080		829,213
Inventories, net	966,609		769,175
Other current assets	211,272		183,605
Total current assets	2,411,614		2,128,765
Property, plant and equipment, net	597,153		617,138
Right of use assets, net	168,829		169,924
Goodwill	5,173,411		5,238,726
Other intangibles, net	3,234,443		3,368,629
Investments and other assets	399,521		375,005
Total assets	$	11,984,971	$	11,898,187

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt, net	$	354,791	$	315,093
Accounts payable	540,667		470,252
Customer advanced payments	327,537		298,728
Income taxes payable	35,216		35,904
Accrued liabilities and other	374,818		443,337
Total current liabilities	1,633,029		1,563,314
Long-term debt, net	2,147,362		2,229,148
Deferred income taxes	711,541		719,675
Other long-term liabilities	542,948		514,166
Total liabilities	5,034,880		5,026,303
Stockholders’ equity:
Common stock	2,695		2,689
Capital in excess of par value	1,040,951		1,012,526
Retained earnings	8,353,735		7,900,113
Accumulated other comprehensive loss	(545,930)		(470,444)
Treasury stock	(1,901,360)		(1,573,000)
Total stockholders’ equity	6,950,091		6,871,884
Total liabilities and stockholders’ equity	$	11,984,971	$	11,898,187

See accompanying notes.

AMETEK, Inc.

Consolidated Statement of Stockholders’ Equity

(In thousands)

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Capital stock

Common stock, $0.01 par value
Balance at the beginning of the period	$	2,693	$	2,678	$	2,689	$	2,676
Shares issued	2		6		6		8
Balance at the end of the period	2,695		2,684		2,695		2,684
Capital in excess of par value
Balance at the beginning of the period	1,018,433		928,412		1,012,526		921,752
Issuance of common stock under employee stock plans	9,562		24,226		5,898		19,446
Share-based compensation expense	12,956		12,153		22,527		23,593
Balance at the end of the period	1,040,951		964,791		1,040,951		964,791
Retained earnings
Balance at the beginning of the period	8,121,781		7,267,856		7,900,113		7,094,656
Net income	282,373		231,679		554,820		450,912
Cash dividends paid	(50,419)		(46,134)		(101,197)		(92,167)

Other	—		—		(1)		—
Balance at the end of the period	8,353,735		7,453,401		8,353,735		7,453,401
Accumulated other comprehensive (loss) income
Foreign currency translation:
Balance at the beginning of the period	(291,511)		(260,785)		(275,365)		(250,748)
Translation adjustments	(87,391)		7,547		(114,576)		(13,953)
Change in long-term intercompany notes	(16,252)		1,329		(23,119)		(5,566)
Net investment hedge instruments gain (loss), net of tax of $(13,777) and $1,459 for the quarter ended June 30, 2022 and 2021 and $(19,608) and $(4,479) for the six months ended June 30, 2022 and 2021, respectively	42,303		(4,512)		60,209		13,846
Balance at the end of the period	(352,851)		(256,421)		(352,851)		(256,421)
Defined benefit pension plans:
Balance at the beginning of the period	(194,079)		(252,090)		(195,079)		(253,720)
Amortization of net actuarial loss and other, net of tax of $(326) and $(527) for the quarter ended June 30, 2022 and 2021 and $(652) and $(1,054) for the six months ended June 30, 2022 and 2021, respectively	1,000		1,630		2,000		3,260
Balance at the end of the period	(193,079)		(250,460)		(193,079)		(250,460)
Accumulated other comprehensive loss at the end of the period	(545,930)		(506,881)		(545,930)		(506,881)
Treasury stock
Balance at the beginning of the period	(1,725,629)		(1,565,323)		(1,573,000)		(1,565,270)
Issuance of common stock under employee stock plans	(1,076)		(492)		3,019		7,452
Purchase of treasury stock	(174,655)		(4,881)		(331,379)		(12,878)
Balance at the end of the period	(1,901,360)		(1,570,696)		(1,901,360)		(1,570,696)
Total stockholders’ equity	$	6,950,091	$	6,343,299	$	6,950,091	$	6,343,299

See accompanying notes.

AMETEK, Inc.

Condensed Consolidated Statement of Cash Flows

(In thousands)

(Unaudited)


	Six months ended June 30,
	2022		2021
Cash provided by (used for):
Operating activities:
Net income	$	554,820	$	450,912
Adjustments to reconcile net income to total operating activities:
Depreciation and amortization	155,218		139,814
Deferred income taxes	(19,459)		27,482
Share-based compensation expense	22,527		23,593

Gain on sale of facilities	(7,054)		—
Net change in assets and liabilities, net of acquisitions	(245,958)		(58,497)
Pension contributions	(3,884)		(4,094)
Other, net	(18,973)		(7,767)
Total operating activities	437,237		571,443
Investing activities:
Additions to property, plant and equipment	(52,540)		(41,005)
Purchases of businesses, net of cash acquired	—		(1,840,845)

Proceeds from sale of facilities	11,754		—
Other, net	(247)		(292)
Total investing activities	(41,033)		(1,882,142)
Financing activities:
Net change in short-term borrowings	56,490		569,949



Repurchases of common stock	(331,379)		(12,878)
Cash dividends paid	(101,197)		(92,167)
Proceeds from stock option exercises	17,827		31,112
Other, net	(12,134)		(4,420)
Total financing activities	(370,393)		491,596
Effect of exchange rate changes on cash and cash equivalents	(23,930)		(3,075)
Increase (decrease) in cash and cash equivalents	1,881		(822,178)
Cash and cash equivalents:
Beginning of period	346,772		1,212,822
End of period	$	348,653	$	390,644

See accompanying notes.

AMETEK, Inc.

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

1. Basis of Presentation

The accompanying consolidated financial statements are unaudited. AMETEK, Inc. (the “Company”) believes that all adjustments (which primarily consist of normal recurring accruals) necessary for a fair presentation of the consolidated financial position of the Company at June 30, 2022, the consolidated results of its operations for the three and six months ended June 30, 2022 and 2021 and its cash flows for the six months ended June 30, 2022 and 2021 have been included. Quarterly results of operations are not necessarily indicative of results for the full year. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the U.S. Securities and Exchange Commission.

2. Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncement

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"), which provides a single comprehensive accounting model for the acquisition of contract balances under ASC 805. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company early adopted the ASU on January 1, 2022, and the amendments in this ASU were applied on a prospective basis to all periods presented. The adoption of ASU 2021-08 did not impact the Company's consolidated results of operations, financial position, cash flows, or financial statement disclosures.

3. Revenues

The outstanding contract asset and liability accounts were as follows:


	2022		2021
	(In thousands)
Contract assets—January 1	$	95,274	$	68,971
Contract assets – June 30	107,902		73,853
Change in contract assets – increase (decrease)	12,628		4,882
Contract liabilities – January 1	328,816		215,093
Contract liabilities – June 30	369,926		333,409
Change in contract liabilities – (increase) decrease	(41,110)		(118,316)
Net change	$	(28,482)	$	(113,434)

The net change for the six months ended June 30, 2022 was primarily driven by contract liabilities, specifically broad-based growth in advance payments from customers. For the six months ended June 30, 2022 and 2021, the Company recognized revenue of $219.3 million and $145.2 million, respectively, that was previously included in the beginning balance of contract liabilities.

Contract assets are reported as a component of Other current assets in the consolidated balance sheet. At June 30, 2022 and December 31, 2021, $42.4 million and $30.1 million of Customer advanced payments (contract liabilities), respectively, were recorded in Other long-term liabilities in the consolidated balance sheets.

The remaining performance obligations not expected to be completed within one year as of June 30, 2022 and December 31, 2021 were $422.1 million and $342.5 million, respectively. Remaining performance obligations represent the transaction price of firm, non-cancelable orders, with expected delivery dates to customers greater than one year from the balance sheet date, for which the performance obligation is unsatisfied or partially unsatisfied. These performance obligations will be substantially satisfied within two to three years.

AMETEK, Inc.

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

Geographic Areas

Net sales were attributed to geographic areas based on the location of the customer. Information about the Company’s operations in different geographic areas was as follows for the three and six months ended June 30:


	Three months ended June 30, 2022						Six months ended June 30, 2022
	EIG		EMG		Total		EIG		EMG		Total
	(In thousands)
United States	$	551,967	$	240,436	$	792,403	$	1,035,593	$	471,813	$	1,507,406
International(1):
United Kingdom	19,050		31,620		50,670		47,005		60,251		107,256
European Union countries	109,425		108,031		217,456		230,139		222,193		452,332
Asia	255,232		70,225		325,457		511,652		133,064		644,716
Other foreign countries	92,574		35,992		128,566		191,618		69,749		261,367
Total international	476,281		245,868		722,149		980,414		485,257		1,465,671
Consolidated net sales	$	1,028,248	$	486,304	$	1,514,552	$	2,016,007	$	957,070	$	2,973,077

(1) Includes U.S. export sales of $394.7 million and $801.2 million for the three and six months ended June 30, 2022.


	Three months ended June 30, 2021						Six months ended June 30, 2021
	EIG		EMG		Total		EIG		EMG		Total
	(In thousands)
United States	$	495,039	$	225,912	$	720,951	$	883,940	$	436,094	$	1,320,034
International(1):
United Kingdom	20,649		28,568		49,217		42,596		58,619		101,215
European Union countries	117,856		103,604		221,460		221,521		198,901		420,422
Asia	217,854		65,449		283,303		415,415		126,643		542,058
Other foreign countries	82,536		28,879		111,415		161,386		56,973		218,359
Total international	438,895		226,500		665,395		840,918		441,136		1,282,054
Consolidated net sales	$	933,934	$	452,412	$	1,386,346	$	1,724,858	$	877,230	$	2,602,088

(1) Includes U.S. export sales of $365.5 million and $696.4 million for the three and six months ended June 30, 2021.

AMETEK, Inc.

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

Major Products and Services

The Company’s major products and services in the reportable segments were as follows:


	Three months ended June 30, 2022						Six months ended June 30, 2022
	EIG		EMG		Total		EIG		EMG		Total
	(In thousands)
Process and analytical instrumentation	$	768,261	$	—	$	768,261	$	1,460,953	$	—	$	1,460,953
Aerospace and power	259,987		137,340		397,327		555,054		264,082		819,136
Automation and engineered solutions	—		348,964		348,964		—		692,988		692,988
Consolidated net sales	$	1,028,248	$	486,304	$	1,514,552	$	2,016,007	$	957,070	$	2,973,077


	Three months ended June 30, 2021						Six months ended June 30, 2021
	EIG		EMG		Total		EIG		EMG		Total
	(In thousands)
Process and analytical instrumentation	$	644,121	$	—	$	644,121	$	1,220,680	$	—	$	1,220,680
Aerospace and power	289,813		126,466		416,279		504,178		248,639		752,817
Automation and engineered solutions	—		325,946		325,946		—		628,591		628,591
Consolidated net sales	$	933,934	$	452,412	$	1,386,346	$	1,724,858	$	877,230	$	2,602,088

Timing of Revenue Recognition


	Three months ended June 30, 2022						Six months ended June 30, 2022
	EIG		EMG		Total		EIG		EMG		Total
	(In thousands)
Products transferred at a point in time	$	839,948	$	423,506	$	1,263,454	$	1,652,896	$	836,160	$	2,489,056
Products and services transferred over time	188,300		62,798		251,098		363,111		120,910		484,021
Consolidated net sales	$	1,028,248	$	486,304	$	1,514,552	$	2,016,007	$	957,070	$	2,973,077


	Three months ended June 30, 2021						Six months ended June 30, 2021
	EIG		EMG		Total		EIG		EMG		Total
	(In thousands)
Products transferred at a point in time	$	767,514	$	408,569	$	1,176,083	$	1,414,766	$	791,600	$	2,206,366
Products and services transferred over time	166,420		43,843		210,263		310,092		85,630		395,722
Consolidated net sales	$	933,934	$	452,412	$	1,386,346	$	1,724,858	$	877,230	$	2,602,088

AMETEK, Inc.

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

Product Warranties

The Company provides limited warranties in connection with the sale of its products. The warranty periods for products sold vary among the Company’s operations, but the majority do not exceed one year. The Company calculates its warranty expense provision based on its historical warranty experience and adjustments are made periodically to reflect actual warranty expenses. Product warranty obligations are reported as a component of Accrued liabilities and other in the consolidated balance sheet.

Changes in the accrued product warranty obligation were as follows:


	Six Months Ended June 30,
	2022		2021
	(In thousands)
Balance at the beginning of the period	$	27,478	$	27,839
Accruals for warranties issued during the period	5,143		5,964
Settlements made during the period	(6,023)		(6,620)
Warranty accruals related to acquired businesses and other during the period	(632)		2,169
Balance at the end of the period	$	25,966	$	29,352

Accounts Receivable

The Company maintains allowances for estimated losses resulting from the inability of customers to meet their financial obligations to the Company. The Company recognizes an allowance for credit losses, on all accounts receivable and contract assets, which considers risk of future credit losses based on factors such as historical experience, contract terms, as well as general and market business conditions, country, and political risk. Balances are written off when determined to be uncollectible.

At June 30, 2022, the Company had $885.1 million of accounts receivable, net of allowances of $11.2 million. Changes in the allowance were not material for the three and six months ended June 30, 2022.

4. Earnings Per Share

The calculation of basic earnings per share is based on the weighted average number of common shares considered outstanding during the periods. The calculation of diluted earnings per share reflects the effect of all potentially dilutive securities (principally outstanding stock options and restricted stock grants). Securities that are anti-dilutive have been excluded and are not significant. The number of weighted average shares used in the calculation of basic earnings per share and diluted earnings per share was as follows:


	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
	(In thousands)
Weighted average shares:
Basic shares	230,100	230,828	230,790	230,632
Equity-based compensation plans	1,147	2,013	1,366	1,937
Diluted shares	231,247	232,841	232,156	232,569

5. Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company utilizes a valuation hierarchy for disclosure of the inputs to the valuations used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active

AMETEK, Inc.

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table provides the Company’s assets that are measured at fair value on a recurring basis, consistent with the fair value hierarchy, at June 30, 2022 and December 31, 2021:


	June 30, 2022		December 31, 2021
	Fair Value		Fair Value
	(In thousands)
Mutual fund investments	$	11,365	$	10,703

The fair value of mutual fund investments, which are valued as level 1 investments, was based on quoted market prices. The mutual fund investments are shown as a component of investments and other assets on the consolidated balance sheet.

For the six months ended June 30, 2022 and 2021, gains and losses on the investments noted above were not significant. No transfers between level 1 and level 2 investments occurred during the six months ended June 30, 2022 and 2021.

Financial Instruments

Cash, cash equivalents and mutual fund investments are recorded at fair value at June 30, 2022 and December 31, 2021 in the accompanying consolidated balance sheet.

The following table provides the estimated fair values of the Company’s financial instrument liabilities, for which fair value is measured for disclosure purposes only, compared to the recorded amounts at June 30, 2022 and December 31, 2021:


	June 30, 2022				December 31, 2021
	Recorded Amount		Fair Value		Recorded Amount		Fair Value
	(In thousands)
Long-term debt (including current portion)	$	(2,150,381)	$	(2,071,751)	$	(2,233,705)	$	(2,378,930)

The fair value of net short-term borrowings approximates the carrying value. Net short-term borrowings are valued as level 2 liabilities as they are corroborated by observable market data. The Company’s net long-term debt is all privately held with no public market for this debt, therefore, the fair value of net long-term debt was computed based on comparable current market data for similar debt instruments and is considered a level 3 liability.

Foreign Currency

At June 30, 2022, the Company had a Euro forward contract for a total notional value of 40.0 million Euros and a Canadian dollar forward contract for a notional value of 8.0 million Canadian dollars. For the six months ended June 30, 2022, realized and unrealized gains and losses on the foreign currency forward contracts were not significant.

6. Hedging Activities

The Company has designated certain foreign-currency-denominated long-term borrowings as hedges of the net investment in certain foreign operations. As of June 30, 2022, these net investment hedges included British-pound-and Euro-denominated long-term debt. These borrowings were designed to create net investment hedges in certain designated foreign subsidiaries. The Company designated the British-pound- and Euro-denominated loans referred to above as hedging instruments to offset translation gains or losses on the net investment due to changes in the British pound and Euro exchange rates. These net investment hedges are evidenced by management’s contemporaneous documentation supporting the hedge designation. Any gain or loss on the hedging instruments (the debt) following hedge designation is reported in

AMETEK, Inc.

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

accumulated other comprehensive income in the same manner as the translation adjustment on the hedged investment based on changes in the spot rate, which is used to measure hedge effectiveness.

At June 30, 2022, the Company had $273.6 million of British-pound-denominated loans, which were designated as a hedge against the net investment in British pound functional currency foreign subsidiaries. At June 30, 2022, the Company had $559.9 million in Euro-denominated loans, which were designated as a hedge against the net investment in Euro functional currency foreign subsidiaries. As a result of the British-pound- and Euro-denominated loans designated and 100% effective as net investment hedges, $79.8 million of pre-tax currency remeasurement gains have been included in the foreign currency translation component of other comprehensive income for the six months ended June 30, 2022.

7. Inventories, net


	June 30, 2022		December 31, 2021
	(In thousands)
Finished goods and parts	$	117,959	$	89,985
Work in process	148,998		122,356
Raw materials and purchased parts	699,652		556,834
Total inventories, net	$	966,609	$	769,175

8. Leases

The Company has commitments under operating leases for certain facilities, vehicles and equipment used in its operations. Cash used in operations for operating leases was not materially different from operating lease expense for the six months ended June 30, 2022 and 2021. The Company's leases have initial lease terms ranging from four months to 16 years. Certain lease agreements contain provisions for future rent increases.

The components of lease expense were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Operating lease cost	$	15,346	$	12,006	$	30,724	$	23,523
Variable lease cost	2,399		1,402		4,652		2,872
Total lease cost	$	17,745	$	13,408	$	35,376	$	26,395

Supplemental balance sheet information related to leases was as follows:


	June 30, 2022		December 31, 2021
	(In thousands)
Right of use assets, net	$	168,829	$	169,924
Lease liabilities included in Accrued Liabilities and other	47,398		47,353
Lease liabilities included in Other long-term liabilities	127,174		129,101
Total lease liabilities	$	174,572	$	176,454

AMETEK, Inc.

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

Maturities of lease liabilities as of June 30, 2022 were as follows:


Lease Liability Maturity Analysis	Operating Leases
	(In thousands)
Remaining 2022	$	27,042
2023	46,817
2024	35,024
2025	25,611
2026	18,758
Thereafter	28,245
Total lease payments	181,497
Less: imputed interest	6,925
	$	174,572

The Company does not have any significant leases that have not yet commenced.

9. Goodwill

The changes in the carrying amounts of goodwill by segment were as follows:


	EIG		EMG		Total
	(In millions)
Balance at December 31, 2021	$	4,073.8	$	1,164.9	$	5,238.7

Purchase price allocation adjustments and other	4.2		—		4.2
Foreign currency translation adjustments	(38.8)		(30.7)		(69.5)
Balance at June 30, 2022	$	4,039.2	$	1,134.2	$	5,173.4

The Company finalized its measurements of certain tangible and intangible assets and liabilities for its November 2021 acquisition of Alphasense, which had no material impact to the consolidated statement of income and balance sheet.

10. Income Taxes

At June 30, 2022, the Company had gross uncertain tax benefits of $161.2 million, of which $118.7 million, if recognized, would impact the effective tax rate.

The following is a reconciliation of the liability for uncertain tax positions (in millions):


Balance at December 31, 2021	$	147.0
Additions for tax positions	14.6
Reductions for tax positions	(0.4)
Balance at June 30, 2022	$	161.2

The additions above primarily reflect the tax positions for foreign tax planning initiatives. The Company recognizes interest and penalties accrued related to uncertain tax positions in income tax expense. The amounts recognized in income tax expense for interest and penalties during the three and six months ended June 30, 2022 and 2021 were not significant.

The effective tax rate for the three months ended June 30, 2022 was 18.5%, compared with 20.6% for the three months ended June 30, 2021. The lower effective tax rate in the second quarter of 2022 is primarily due to improved foreign-derived intangible income ("FDII") benefits on exported products and favorable foreign deferred taxes. The higher effective tax rate in 2021 included an increase in the foreign rate differential and the remeasurement of the deferred tax liabilities due to an increase in the UK tax rate in 2021.

AMETEK, Inc.

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

11. Debt

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 June 30, 2022, the Company had $360.0 million outstanding on the revolver with a maturity date of May 2027.

12. Share-Based Compensation

The Company's share-based compensation plans are described in Note 11, Share-Based Compensation, to the consolidated financial statements in Part II, Item 8, filed on the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Share Based Compensation Expense

Total share-based compensation expense was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Stock option expense	$	3,383	$	3,326	$	6,823	$	7,249
Restricted stock expense	5,253		5,690		10,031		11,917
Performance restricted stock unit expense	4,320		3,137		5,673		4,427
Total pre-tax expense	$	12,956	$	12,153	$	22,527	$	23,593

Pre-tax share-based compensation expense is included in the consolidated statement of income in either Cost of sales or Selling, general and administrative expenses, depending on where the recipient’s cash compensation is reported.

Stock Options

The fair value of each stock option grant is estimated on the grant date using a Black-Scholes-Merton option pricing model. The following weighted average assumptions were used in the Black-Scholes-Merton model to estimate the fair values of stock options granted during the periods indicated:


	Six Months Ended June 30, 2022			Year Ended December 31, 2021
Expected volatility	24.5		%	24.2		%
Expected term (years)	5.0			5.0
Risk-free interest rate	2.33		%	0.85		%
Expected dividend yield	0.65		%	0.66		%
Black-Scholes-Merton fair value per stock option granted	$	32.54		$	25.63

AMETEK, Inc.

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

The following is a summary of the Company’s stock option activity and related information:


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(In thousands)			(Years)	(In millions)
Outstanding at December 31, 2021	3,352	$	76.08
Granted	608	134.69
Exercised	(291)	62.97
Forfeited	(54)	99.43
Outstanding at June 30, 2022	3,615	$	86.64	6.5	$	104.8
Exercisable at June 30, 2022	2,438	$	72.77	5.4	$	92.6

The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2022 was $18.3 million. The total fair value of stock options vested during the six months ended June 30, 2022 was $11.2 million. As of June 30, 2022, there was approximately $24.3 million of expected future pre-tax compensation expense related to the 1.2 million non-vested stock options outstanding, which is expected to be recognized over a weighted average period of approximately two years.

Restricted Stock

The following is a summary of the Company’s non-vested restricted stock activity and related information:


	Shares	Weighted Average Grant Date Fair Value
	(In thousands)
Non-vested restricted stock outstanding at December 31, 2021	413	$	96.07
Granted	181	134.63
Vested	(155)	85.97
Forfeited	(25)	105.34
Non-vested restricted stock outstanding at June 30, 2022	414	$	116.13

The total fair value of restricted stock vested during the six months ended June 30, 2022 was $13.3 million. As of June 30, 2022, there was approximately $37.9 million of expected future pre-tax compensation expense related to the 0.4 million non-vested restricted shares outstanding, which is expected to be recognized over a weighted average period of approximately two years.

Performance Restricted Stock Units

In March 2022, the Company granted performance restricted stock units ("PRSU") to officers and certain key management-level employees. The PRSUs vest over a period up to three years from the grant date based on continuous service, with the number of shares earned (0% to 200% of the target award) depending upon the extent to which the Company achieves certain financial and market performance targets measured over the period from January 1 of the year of grant to December 31 of the third year. Half of the PRSUs were valued in a manner similar to restricted stock as the financial targets are based on the Company’s operating results, which represents a performance condition. The grant date fair value of these PRSUs are recognized as compensation expense over the vesting period based on the probable number of awards to vest at each reporting date.

The other half of the PRSUs were valued using a Monte Carlo model as the performance target is related to the Company’s total shareholder return compared to a group of peer companies, which represents a market condition. The Company recognizes the grant date fair value of these awards as compensation expense ratably over the vesting period.

AMETEK, Inc.

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

The following is a summary of the Company’s non-vested performance restricted stock activity and related information:


	Shares	Weighted Average Grant Date Fair Value
	(In thousands)
Non-vested performance restricted stock outstanding at December 31, 2021	289	$	85.29
Granted	87	134.69
Performance assumption change 1	66	81.76
Vested	(161)	81.76
Forfeited	(3)	96.93
Non-vested performance restricted stock outstanding at June 30, 2022	278	$	101.95

1 Reflects the number of PRSUs above target levels based on performance metrics.

As of June 30, 2022, there was approximately $13.2 million of expected future pre-tax compensation expense related to the 0.3 million non-vested restricted shares outstanding, which is expected to be recognized over a weighted average period of less than one year.

13. Retirement and Pension Plans

The components of net periodic pension benefit expense (income) were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Defined benefit plans:
Service cost	$	1,331	$	2,030	$	2,705	$	4,051
Interest cost	5,032		4,581		10,152		9,148
Expected return on plan assets	(15,033)		(14,221)		(30,301)		(28,395)
Amortization of net actuarial loss and other	2,123		4,379		4,297		8,732
Pension income	(6,547)		(3,231)		(13,147)		(6,464)
Other plans:
Defined contribution plans	9,811		7,961		23,072		16,416
Foreign plans and other	2,077		2,123		4,395		4,357
Total other plans	11,888		10,084		27,467		20,773
Total net pension expense	$	5,341	$	6,853	$	14,320	$	14,309

For defined benefit plans, the net periodic benefit income, other than the service cost component, is included in “Other (expense) income, net” in the consolidated statement of income.

For the six months ended June 30, 2022 and 2021, contributions to the Company’s defined benefit pension plans were $3.9 million and $4.1 million, respectively. The Company’s current estimate of 2022 contributions to its worldwide defined benefit pension plans is in line with the range disclosed in Note 12 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

AMETEK, Inc.

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

14. Contingencies

Asbestos Litigation

The Company (including its subsidiaries) has been named as a defendant in a number of asbestos-related lawsuits. Certain of these lawsuits relate to a business which was acquired by the Company and do not involve products which were manufactured or sold by the Company. In connection with these lawsuits, the seller of such business has agreed to indemnify the Company against these claims (the “Indemnified Claims”). The Indemnified Claims have been tendered to, and are being defended by, such seller. The seller has met its obligations, in all respects, and the Company does not have any reason to believe such party would fail to fulfill its obligations in the future. To date, no judgments have been rendered against the Company as a result of any asbestos-related lawsuit. The Company believes that it has good and valid defenses to each of these claims and intends to defend them vigorously.

Environmental Matters

Certain historic processes in the manufacture of products have resulted in environmentally hazardous waste by-products as defined by federal and state laws and regulations. At June 30, 2022, the Company is named a Potentially Responsible Party (“PRP”) at 13 non-AMETEK-owned former waste disposal or treatment sites (the “non-owned” sites). The Company is identified as a “de minimis” party in 12 of these sites based on the low volume of waste attributed to the Company relative to the amounts attributed to other named PRPs. In eight of these sites, the Company has reached a tentative agreement on the cost of the de minimis settlement to satisfy its obligation and is awaiting executed agreements. The tentatively agreed-to settlement amounts are fully reserved. In the other four sites, the Company is continuing to investigate the accuracy of the alleged volume attributed to the Company as estimated by the parties primarily responsible for remedial activity at the sites to establish an appropriate settlement amount. At the remaining site where the Company is a non-de minimis PRP, the Company is participating in the investigation and/or related required remediation as part of a PRP Group and reserves have been established to satisfy the Company’s expected obligations. The Company historically has resolved these issues within established reserve levels and reasonably expects this result will continue. In addition to these non-owned sites, the Company has an ongoing practice of providing reserves for probable remediation activities at certain of its current or previously owned manufacturing locations (the “owned” sites). For claims and proceedings against the Company with respect to other environmental matters, reserves are established once the Company has determined that a loss is probable and estimable. This estimate is refined as the Company moves through the various stages of investigation, risk assessment, feasibility study and corrective action processes. In certain instances, the Company has developed a range of estimates for such costs and has recorded a liability based on the best estimate. It is reasonably possible that the actual cost of remediation of the individual sites could vary from the current estimates and the amounts accrued in the consolidated financial statements; however, the amounts of such variances are not expected to result in a material change to the consolidated financial statements. In estimating the Company’s liability for remediation, the Company also considers the likely proportionate share of the anticipated remediation expense and the ability of the other PRPs to fulfill their obligations.

Total environmental reserves at June 30, 2022 and December 31, 2021 were $37.6 million and $37.2 million, respectively, for both non-owned and owned sites. For the six months ended June 30, 2022, the Company recorded $4.5 million in reserves. Additionally, the Company spent $4.1 million on environmental matters for the six months ended June 30, 2022.

The Company has agreements with other former owners of certain of its acquired businesses, as well as new owners of previously owned businesses. Under certain of the agreements, the former or new owners retained, or assumed and agreed to indemnify the Company against, certain environmental and other liabilities under certain circumstances. The Company and some of these other parties also carry insurance coverage for some environmental matters.

The Company believes it has established reserves for the environmental matters described above, which are sufficient to perform all known responsibilities under existing claims and consent orders. In the opinion of management, based on presently available information and the Company’s historical experience related to such matters, an adequate provision for probable costs has been made and the ultimate cost resulting from these actions is not expected to materially affect the consolidated results of operations, financial position or cash flows of the Company.

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